Divi’s Laboratories: Brokerages raise target price on strong Oct-Dec quarter results, should you buy or hold?

The company informed that it has been able to normalise operations during the third quarter of the current fiscal.

Divi’s Laboratories Ltd share price fell as much as 3 per cent to Rs 3,700 apiece on BSE, despite reporting a 31.05 per cent on-year growth in net profit to Rs 470.62 crore in the October-December quarter. Divis Laboratories stock rose to a day’s high of Rs 3886 on Monday. So far in the trade, over 58,000 shares have been traded on the BSE, while 20.88 lakh shares exchanged hands on the National Stock Exchange (NSE). AR Ramachandran, Co-founder & Trainer, Tips2Trade, told Financial Express Online, that with a strong operational performance in Q3FY21 and an overall positive sentiment prevailing in the market, Divi’s Laboratories remains a strong buy from a long term perspective.

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Ramachandran said that a dip near 3500-3550 can be used to buy for higher targets of 4100-4250 in the near term. Total income of the company on a consolidated basis stood at Rs 1,720.76 crore for the quarter under review. The company informed that it has been able to normalise operations during the third quarter of the current fiscal. Post Q3 numbers, at least two brokerages have recommended to buy the stock with an upside up to 20 per cent from the previous close.

Analysts at Motilal Oswal Financial Services have given a target price of Rs 4,530 apiece, supported by promising demand prospects and multiple growth levers such as new product additions, strong chemistry skill sets, efficient manufacturing capabilities, a scale-led advantage in legacy molecules, minimal financial leverage, and sufficient cash available for new projects. Those at Edelweiss have given ‘hold’ rating with a price target of Rs 3,920 apiece. It has raised the target multiple to 40x Jun-22E EPS (from 36x) considering its best-in-class margins and returns ratios, strong cash flows and growth visibility as the company looks to capitalise on new opportunities.

Research and brokerage firm ICICI Direct Research has given a ‘buy’ rating to Divi’s Laboratories with a price target of Rs 4,440 apiece. Analysts said that more than strong quarterly performance, an important narrative for Divi’s is unprecedented capex to further augment capacities besides preparing for growing opportunities arising from CHina plus one factor. “Divi’s stays a quintessential play on Indian API/CRAMs segment with its product offering, execution prowess,” it said.

(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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