Divis Laboratories Seen Reaching Rs 6900: Prabhudas Lilladher Research Recommendation

Divi's Laboratories Q4FY26 Earnings Miss Estimates, Outlook Remains Positive

Divi's Laboratories, a leading pharmaceutical company, has reported its Q4FY26 earnings, which missed the estimates of Prabhudas Lilladher's research report due to a lower gross margin. Despite this, the company's revenues were largely aided by the Contract Services (CS) segment and a favorable currency tailwind.

The management of Divi's Laboratories indicated that inventory levels may increase further in Q1FY27E to ensure uninterrupted operations. This move is expected to have a positive impact on the company's revenue in the long run. The research report expects stable margins in FY27 and a revenue acceleration from FY28, driven by the commencement of some Contract Development and Manufacturing Organization (CDMO) and contrast media contracts, as well as the scale-up of peptide revenue.

Outlook and Estimates Update

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The research report has cut its FY27E/FY28E earnings per share (EPS) estimates by 2-4% due to the lower-than-expected Q4FY26 earnings. However, the report still expects a strong growth in the company's earnings, with an estimated 19% EBITDA and PAT compound annual growth rate (CAGR) over FY26-28E.

Valuation and Rating

At the current market price (CMP), Divi's Laboratories is trading at 52x FY28E EPS. Despite the earnings miss, the research report maintains its 'Accumulate' rating on the stock, with a revised target price of INR 6,900/share.

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