Divi’s Labs Q2 net profit soars 35%, forex gain boosts

Divi’s Laboratories Ltd beat Street forecasts on Friday, reporting strong double-digit revenue and profit growth for the July-September period, the second quarter of this financial year.

The Hyderabad-based drugmaker’s consolidated revenue from operations rose 17% from a year ago. ₹2,860 crore. The contract manufacturer reported a consolidated net profit of: ₹689 crore, up 35% year-on-year. The company announced foreign exchange profit ₹63 crore.

Revenue growth on a constant currency basis was 10.8% in the quarter.

A. Bloomberg The survey pegged the company’s revenue at: ₹2,599 crore and profit after tax ₹608.9 crore. Analysts expected the company’s revenue to grow 9-10% annually, driven by growth in its specialty synthesis and generic drug business.

Divi produces medicines for innovators as well as generic players. Custom synthesis refers to the production of specific chemical compounds, such as new active pharmaceutical ingredients (APIs) or intermediates, tailored to the customer’s needs. APIs are the key components of a drug responsible for making its treatment effective.

Revenue mix

Exports account for 90% of total revenue, with the US, UK and Europe together accounting for 74% of total exports, the company’s management said in an earnings release.

Generic sales accounted for 44% of the total product mix in the reporting quarter, while the remaining 56% consisted of proprietary synthesis.

While the company has faced pricing pressure in its generics business, it has maintained consistent volumes across its core portfolio of 30 commercially produced products. “Despite ongoing pricing pressure, our backward integration model continues to enable us to effectively manage input cost. Our unit-3 facility in Kakinada, which became operational earlier this year, also supports our supply chain by enabling in-house manufacturing of starting materials and intermediates,” CEO Kiran Divi told investors on the earnings call.

Divi said the company’s custom synthesis business has attracted strong interest due to continuous requests for proposals (RFPs) and site visits from global innovators.

Divi Laboratories is also expanding its peptide offerings with the goal of becoming a global leader in complex peptide production. The company opened its peptide center of excellence this year and is involved in a number of projects in various stages of clinical development.

“As these programs progress [clinical] “We are prepared to further expand investments to meet demand,” Divi said.

Extensive use

Peptides are used as pharmaceuticals to treat a variety of diseases, including diabetes, cancer, and hormonal disorders. The demand for peptides is also increasing, as is the demand for GLP-1 (glucagon-like peptide-1) agonists, a class of drugs used to treat type 2 diabetes and obesity.

The company’s nutraceutical business is also a major growth driver and has reported sales of: ₹242 crore during the quarter.

Divi is currently running three capital expenditure programs with an estimated investment amount of: ₹2,000 crore.

Company management had previously told investors that global innovators had increased interest in the company this year. As innovators look to diversify their supply chains away from China, Indian contract development and manufacturing organization (CDMO) giants like Divi are poised to win.

Divi announced the appointment of Nimmagadda Venkata Anirudh as president (nutraceuticals) on Friday.

Despite the strong showing, the company’s shares closed down 4% after the recent rally. ₹6,648.00 on the National Stock Exchange on Friday.