(1/17)
About:
DLL was incorporated in 1990 by Dr Murli K Divi. DLL is engaged in manufacturing of generic APIs, Nutraceutical, Custom
Synthesis of APIs & Intermediates for innovator companies
Divi's Lab is the leading manufacturer of APIs, supplying to over 95 countries.
(2/17)
Global Pharma Industry:
The pharma industry will be closely
monitored by govt in all countries in times to come.
The industry is expected to grow at 3–6% CAGR through 2025, reaching about $1.6 trillion in total
market size in 2025.
(3/17)
Indian pharma industry:
India ranks 3rd worldwide for
pharmaceutical production by volume & 14th by value.
The Indian active ingredients industry has progressed
from being an industry manufacturing simple
molecules to manufacturing high
value and complex APIs.
(4/17)
The Man behind Divis Lab!
Dr. Murli K. Divi is a postgraduate in Pharmaceutical Chemistry from College of Pharmacy, Manipal
He has over 30 years of experience in this field
He has previously worked with Trinity Chemical Corporation, Schuylkill Chemical & Fike Chemicals
(5/17)
Catering to Diversified Geography:
Here is the Revenue breakup by region:
1. India : 12%
2. Asia : 12.4%
3. Europe : 47.4%
4. North America : 23.7%
5. ROW : 4.5%
(6/17)
Best in class financial ratios:
1. Return on Net Worth : 21.08%
2. ROCE : 34.69%
3. Basic EPS : 73.63
4. Debt to Equity : 0.00
5. OPM % : 42%
6. NPM % : 28.5%
7. Sales growth : 25.2%
8. ROE : 23.9%
(7/17)
Business segments:
Divis lab has 2 product categories
1. Generic APIs & Nutraceuticals
2. Custom Synthesis of APIs, intermediaries & specialty ingredients for innovator pharma Giants
Top 5 products account for 49% of revenue
Top 5 customers account for 34% of revenue
(8/17)
Shareholding Pattern:
1. Promoters : 51.97%
2. Mutual funds: 14.67%
3. FIIs : 19.08%
4. Indian Public : 8.57%
5. Others : 5.71%
Shareholding Profile:
1. NSDL : 97.10%
2. CDSL: 2.83%
3. Physical: 0.07%
(9/17)
Key Growth Drivers:
1. Healthy growth prospects of the industry:
Pharma exports are expected to grow by 8%-10% on a you basis & the increase in exports will be backed by higher exports
to USA, pharmemerging nations and developed nations
(10/17)
2. Custom Synthesis:
Divi’s Custom synthesis division is
on strong footing and company is engaged with 6 out of 10 pharma
companies across the US, EU and Japan.
High entry barrier in this segment
offers superior growth & margin compared to pharma generic business.
(11/17)
3. Fruits of capex expansion:
Divis lab was one of the first to focus on backward integration. This has helped them to solidify supply chain management & cost reduction due to focus on improving technology
(12/17)
4. China +1 in API:
India used to import ~70% of Pharma API from China. Then GOI announced a package of ₹10,000 crore stimulus package to boost up the domestic pharma API industry
So,it is a huge opportunity for Divis
as ~50% of its revenue comes from generic API.
(13/17)
Recent developments:
1. The company is operating at 80-85% of production capacity.
2. Targeting molecules whose patent expires in 2023–25, to
tune of $20bn patent getting expired.
3. Divis is anticipating ₹100cr capex to be capitalized in Q4FY22.
(14/17)
Key Risk:
1. High exposure to forex fluctuation risk:
DLL is exposed to forex risk as major revenue of the company is derived from exports.
Divi’s imports around 50% of the raw material consumption which provides natural hedge to the tune of around 25%.
(15/17)
2. Exposure to regulatory risk:
The pharma industry is highly regulated & requires various licenses & permissions for business
Each authority has its own requirement & they could refuse to grant approval, even when a product has already been approved in another country
(16/17)
Conclusion:
Divis Lab has a very strong margin levels and forward looking management. They have established track record in
CRAMS segment with reputed clientele & strong R&D capabilities.
However, product concentration risk & forex risk should be analysed carefully.
