Divi’s Laboratories share price surges nearly 7% to hit record high post Q2 result; should you buy?

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Updated: Nov 09, 2020 3:51 PM

Divi's Laboratories has robust chemistry skill sets, strong business visibility, market leadership in select products and healthy balance sheet.

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Divi’s Laboratories share price hit a record high of Rs 3,461.80, rising nearly 7 per cent on the BSE on a 45.63 per cent on-year jump in its net profit at Rs 520 crore in July-September quarter. The pharmaceutical company posted a profit of Rs 356.78 crore in the corresponding quarter of the last year. Divis Laboratories has surpassed its previous high of Rs 3,888 apiece, touched in September this year. Analysts say that Divi’s Laboratories was in consolidation since mid of August 2020, and formed intermediate support at 3000 levels. “In the given scenario, the stock has posted a consolidation breakout by surpassing intermediate resistance of 3250-3300 levels indicating continue to trend,” Abhishek Karande, CMT – Senior Research Analyst at Reliance Securities, told Financial Express Online.

Divi’s Laboratories shares ended 5.73 per cent at Rs 3,423.35 apiece, as compared to a 1.68 per cent rise in the S&P BSE Sensex. Karande added that at a current level of Rs 3450, the stock could possibly continue to oscillate in the uncharted territory. “This higher oscillation is expected to continue until 3550-3600 levels. The minor pullback cannot be ruled out until 3300 levels,” he added. The company’s revenue from operations increased by 21 per cent on-year to Rs 1,749.30 crore. The generics sales grew 23 per cent on-year to Rs 1,040 crore, and custom synthesis sales grew 18 per cent-on year to Rs 700 crore.

Research and brokerage firm Motilal Oswal Financial Services has a buy rating to Divis Labs stock, with a target price of Rs 3,900, implying an upside of 20 per cent from the previous close. The brokerage firm is positive on Divis Labs on the back of robust chemistry skill sets, strong business visibility ahead of capex, market leadership in select products, healthy balance sheet, and consistently superior return ratio.

Divi’s Labs will have to jump 24 per cent from the previous close to touch the price target of Rs 4,000, pegged by Philip Capital. It highlighted that the fresh CS projects add value growth visibility and indicate about Chinese replacement opportunities, the Kakinada site to boost operating efficiency of existing USFDA approved sites and 4th greenfield site indicates the robust growth outlook.

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