Divi’s Laboratories is sitting on what Jefferies believes could be one of the most consequential pharmaceutical manufacturing buildouts in India right now. The brokerage has a ‘Buy’ rating on the stock with a price target of Rs 8,100, which works out to 36% upside from its current trading price.
The thesis rests on two large contract manufacturing deals in GLP drugs, a growing pipeline of peptide molecules, rising capacity utilisation, and a potential Eli Lilly supply relationship that has not even made it into base case numbers yet.
Divi’s Labs: Jefferies projects string revenue outlook
Jefferies projects Divi’s revenue will grow to Rs 14,249 crore by FY28 from Rs 9,360 crore in FY25, with earnings per share climbing to Rs 141.91 from Rs 82.53 over the same period. By FY32, the brokerage sees the company as a $2.7 billion sales operation with EBITDA margins back above 40% for the first time since the pandemic years.
The price target is derived at 57 times Jefferies’ March 2028 earnings per share estimate of Rs 141.91. Revenue is expected to grow at a compounded annual rate of 16% between FY26 and FY28, while EBITDA compounds at 21% annually over the same window.
Net profit is estimated to rise to Rs 3,767 crore by FY28 from Rs 2,540 crore in FY26. In the bull case, Jefferies stretches the target to Rs 8,930, representing 41% upside from current levels.
The downside price of Rs 5,740 assumes slower revenue growth of 14% compounded annually and a lower target multiple of 45 times earnings. The upside-to-downside ratio, as Jefferies frames it in the note, stands at 4.43 to 1, which is a notably wide gap by any measure of risk-reward analysis in Indian pharma research, the report explained.
“A strong peptide pipeline, deep Big Pharma ties and Divi’s being a likely beneficiary from Eli Lilly’s India supply-chain push should drive 15% revenue and 20% earnings per share constant currency growth over FY26 to FY32,” as per Jefferies.
Jefferies on oral GLP intermediates: A $630 million bet on chemical complexity
Divi’s is manufacturing two advanced chemical intermediates for a small molecule oral GLP drug. Jefferies estimates this contract alone could generate $630 million, roughly Rs 5,292 crore, in annual revenues by FY32.
The company has built 150 metric tonnes of annual capacity for each intermediate, totalling 300 metric tonnes combined. Jefferies assumes only 60% utilisation of that capacity, arriving at 180 metric tonnes of annual output at a blended price of $3,500 per kilogram.
The two intermediates are priced differently because of how difficult each is to manufacture. The first acts as a structural backbone that allows the drug to survive stomach acid and be absorbed as a pill rather than an injection. It is assumed to fetch $4,500 per kilogram.
The second is the pharmacologically active portion that engages the GLP-1 receptor in the pancreas and brain, triggering insulin release and signalling the liver to reduce glucose output. It is priced at $2,500 per kilogram. Both require more chemical steps to produce than most comparable drug intermediates available commercially, which is what justifies the pricing premium Jefferies has built into its model.
“These are highly complex chiral molecules with regio selectivity and steric hindrances,” the report said, adding that pricing could remain upwards of $2,000 per kg even at scale.
Jefferies on injectable GLP peptides: $426 million from four fragments
Beyond the oral drug opportunity, Jefferies believes Divi’s holds a separate contract with a major global pharmaceutical company to supply peptide fragments for an injectable GLP drug. The project is currently in technology transfer and is expected to come online in the second half of calendar year 2027.
By FY32, Jefferies puts potential revenues from this contract at $426 million, or approximately Rs 3,578 crore.
The drug is a 39-amino acid peptide assembled from four fragments produced using solid-phase peptide synthesis, known as SPPS. Each fragment costs between $6,300 and $10,200 per kilogram to manufacture, averaging out at $8,027 per kilogram across the four, the firm added.
Fragment pricing is projected to rise to $32,000 per kilogram by FY32 from roughly $26,757 per kilogram currently, after factoring in annual price inflation of 3%. Jefferies assumes Divi’s captures 25% of total global fragment supply for this drug, serving a patient pool that it estimates will reach 33 million by FY32.
“Divi’s is currently in tech transfer phase and basis management commentary suggests that the project will come online by the second half of calendar year 2027,” Jefferies noted.
Jefferies on Eli Lilly’s India push: The wildcard
Eli Lilly has publicly committed to investing $1 billion in India as part of its global supply chain strategy. Jefferies makes a pointed argument that this capital will not be distributed across a wide vendor base and will instead go to a very small number of proven contract manufacturing partners with the technical depth to handle complex molecules at scale, as per Jefferies.
Divi’s fits that description better than most peers, given its existing relationships with global pharmaceutical majors. Critically, no Eli Lilly-linked volume has been modelled into Jefferies’ FY26 to FY28 base case estimates at all, which means any formalised supply agreement would represent pure incremental upside to an already strong growth projection, the firm added.
“We believe these investments will be through very select CDMO partners, where Divi’s could be a strong beneficiary,” Jefferies added.
Jefferies on Divi’s capex cycle: 27% of new capacity still waiting to come online
Divi’s entered FY26 with capital expenditure guidance of Rs 1,400 crore, a number that was subsequently raised to Rs 2,000 crore and has since been revised upward again beyond that level, the report added.
Capital work in progress on the balance sheet climbed to Rs 2,400 crore as of the third quarter of FY26 from Rs 780 crore at the end of FY25. Jefferies calculates that roughly 27% of the capacity being created has not yet started contributing to revenues, which means a substantial production ramp is still ahead of the company rather than behind it, the global brokerage added.
Gross block is estimated at Rs 9,000 crore for FY26, growing at around 14% annually as new assets are commissioned and begin generating output, as per Jefferies.
Jefferies on margins: Back to 40% for the first time since Covid
EBITDA margins are projected to expand to 41% by FY32 from 32% in FY25, passing through 33% in FY26, 34% in FY27, and 36% by FY28 along the way, the firm projected.
In absolute terms, EBITDA is expected to rise to Rs 5,116 crore by FY28 from Rs 2,968 crore in FY25. By FY32, Jefferies’ base case puts EBITDA at $1.11 billion, nearly three times the FY26 level of $389 million, the report added.
Custom synthesis carries the highest incremental EBITDA margin assumption at 50%, followed by contrast media at 45%. These two segments do the bulk of the margin expansion work over the forecast period, as per Jefferies.
“In the past 10 years Divi’s crossed 40% margin only during Covid. We expect GLP to bring back those margin levels,” Jefferies added.
Conclusion
Jefferies’ case for Divi’s Laboratories is built on the idea that the company got into the right manufacturing contracts at the right time, spent heavily on capacity before the revenue arrived, and is now approaching the point where that investment starts paying off at scale.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to ‘Buy’ or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.