Divis's Labs Surpasses Rs 1 Lakh Crore Valuation For The First Time

On Thursday, shares of Divi's Laboratories Ltd rose 4% to an all-time high of Rs 3,854.20, pushing the pharma company's valuation above Rs 1 lakh crore for the first time ever.

With this, it becomes the second Indian pharmaceutical company to cross the Rs 1 lakh crore market cap.

At the time of writing, Sun Pharmaceutical Industries Limited's market cap stood at Rs 1.3 lakh crore while Divi's Labs's stood at Rs 1.02 lakh crore.

Brokerages and investors are bullish on Divi's Labs on the prospects of strong earnings due to its aggressive capex plan. The company has been witnessing strong demand for both active pharmaceutical ingredients (API) and custom synthesis operations.

Anticipating strong demand traction, the company has embarked on a capacity expansion plan which is expected to be completed by fiscal 2020-21 and would start contributing to the topline in the following year.

"We expect Divi's to reap benefits of backward integration, capacity expansion, and emerging opportunities in the API and custom synthesis space. Strong earnings visibility, almost zero debt, and strong return ratios bode well from a growth perspective. Moreover, the company does not have any pending regulatory hurdles, which is a key positive", said Sharekhan in a recent report where it has placed a "buy" rating on the stock and a price target of Rs 4,175 apiece.

Brokerage Anand Rathi also has a 'buy' recommendation on Divi's Laboratories Ltd. with a target price of Rs 4,095.

"We remain positive on the stock given its strong market position, strength in API manufacturing, established long-term contract with customers and benefit from its capex programs," it said.

Divi's Labs recently announced Rs 400 crore capex plan for its custom synthesis segment, backed by strong orders from customers, especially in the Europe region.