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Informist, Monday, Oct. 27, 2025

By Narayana Krishna

HYDERABAD – Divi's Laboratories Ltd.'s September quarter earnings are expected to be driven by strong growth in the custom synthesis and active pharmaceutical ingredients segments, analysts said. Improved performance in these businesses, along with steady contributions from the nutraceutical and contrast media segments, is likely to boost the overall growth and support margin expansion during the quarter.

The high-value specialty chemicals and generic active pharmaceutical ingredients manufacturer is expected to report a net profit of INR 6 billion, up 16% on year and 8% on quarter, according to an average of estimates from six brokerages. The highest estimate for the company's net profit is INR 6.3 billion by ICICI Securities Ltd. and the lowest is INR 5.9 billion by Motilal Oswal Financial Services Ltd.

The revenue for the quarter is expected to rise 13% year-on-year and 11% quarter-on-quarter to INR 26.1 billion, the estimates show. The highest estimate for Divi's Labs September quarter revenue is INR 27.1 billion by ICICI Securities and the lowest is INR 25.2 billion by Systematix Shares and Stocks (India) Ltd. Divi's Labs is yet to announce a date for its Jul-Sept earnings.

Divi's Labs is a supplier of high-value, difficult-to-make pharmaceutical products to global pharmaceutical manufacturers, including top 20 companies known as Big Pharma. The company also offers contract manufacturing services for pharmaceutical companies based in the US and Europe.

Analysts are positive on Divi's Labs' API segment growth for the quarter despite the disruption in the supply of one of its key products. In July, Novartis lost a patent suit in the US for heart drug Entresto, paving the way for the launch of the generic version of the drug by Hyderabad-based MSN Labs Ltd. Divi's is the exclusive supplier of the active pharmaceutical ingredient to Novartis and the loss of patent protection and entry of a generic disrupted the business. Analysts expect a potential 12–13% decline in the company's operating margins due to this development.

Despite the issues related to Entresto supplies, Kotak Securities Ltd. projects an 8% on-year growth in the API business and brokerage firm Motilal Oswal expects it to grow 7% on year for the latest quarter. Nuvama said the company may see price erosion in the API segment for the quarter. The API segment accounts for nearly 45% of Divi's Labs total sales.

In custom synthesis, which accounts for nearly 50% of total sales, the company is expected to report 16% on-year growth in sales for the quarter, Motilal Oswal said. The company's nutraceutical business is projected to see 10% on-year growth, Kotak Securities said.

Divi's Labs' earnings before interest, tax, depreciation, and amortisation margin is expected to improve during the quarter, led by the custom synthesis business, analysts said. Analysts' estimates for the company's Jul-Sept EBITDA margin are in the range of 30.5% to 32.1%. The average of estimates from six brokerages pegs the company's EBITDA at INR 8.2 billion, with the range of estimates from INR 7.9 billion to INR 8.9 billion.

Market participants are looking for the company's comments on the progress of capital expenditure on long-term projects, updates on upcoming opportunities like peptides, and the status of Entresto supplies.

Of the 15 research reports on the company available with Informist, seven have a 'buy' or equivalent rating on the stock with an average target price of INR 6,473, two have a 'hold' rating on the stock with an average target price of INR 5,273, and six have a 'sell' rating with an average price target of INR 5,221.

The stock has risen nearly 7% since the announcement of its June quarter earnings on Aug. 6. At 1055 IST, shares of the company traded at INR 6,495 on the National Stock Exchange, down 1.5% from its previous close. 

Following are the Jul-Sept earnings estimates for Divi's Laboratories Ltd. from six brokerage firms in the descending order by the estimate of net profit:

End

US$1 = INR 88.04

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Vandana Hingorani

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