Divi’s Laboratories, one of India’s largest pharma manufacturers, has posted strong quarterly resultsIn the latest report, brokerage firm Jefferies has maintained a ‘Buy’ rating on the stock and raised the price target to Rs 10,200. This implies an upside potential of 27% from the current market price.
Here is a detailed analysis of Jefferies’ investment rationale –
Divi’s Q1 results: Key highlights
For the quarter ended June 2026, Divi’s revenue came in at Rs 3,080 crore, up 28% year-on-year (YoY) and 9% quarter-on-quarter (QoQ). That alone was 14% higher than what Jefferies had expected. But the real surprise came further down the income statement.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) stood at Rs 1,255 crore, marking a 72% YoY jump. Profit After Tax (PAT) rose 66% YoY to Rs 900 crore. Both figures exceeded Jefferies’ estimates by a wide margin, with EBITDA beating expectations by 49% and PAT by 44%.
Divi’s Labs: Margins cross 40% after four years
Gross margin for the quarter reached 68%, just a shade below the company’s all-time high of 69%, last seen in the third quarter of Fiscal Year (FY) 2021. This pushed EBITDA margin past 40% for the first time in 16 quarters.
According to the Jefferies report, two forces drove this. First, Custom Synthesis (CS), where Divi’s manufactures specific molecules for global pharma clients, made up 60% of total sales, a level touched only once before, during the Covid years.
Second, currency movements played a role. While headline sales grew 28% YoY, constant currency growth was a more modest 10%. As per the report, exports made up 90% of sales, with 75% coming from developed markets in North America (NA) and Europe.
What is powering Divi’s custom synthesis business?
A look at Divi’s Q1 highlights indicates that CS or custom synthesis sales jumped 50% YoY this quarter. The brokerage house Jefferies, in its report, noted that Divi’s supplied higher volumes of validation batches for three dedicated capacity-expansion projects. These are large-scale manufacturing setups built specifically for individual clients.
What happens after validation? Next comes qualification, then regulatory approval, and finally commercial supply. Divi’s is also finalising long-term, multi-year contracts with two customers for iodine-based contrast media, a category of dye used in medical imaging. Commercial supply for one product has already begun, and the second is expected to start within a few months.
Peptides: The next growth bet
Beyond current contracts, Divi’s is betting on peptides, a fast-growing category in modern medicine, including weight-loss and diabetes treatments built on Glucagon-Like Peptide (GLP) technology. The company has added several large 3,000-litre Solid Phase Peptide Synthesis (SPPS) reactors, on top of smaller 500-litre units installed earlier.
Jefferies said, “Divi’s believes peptide will be a significant business opportunity for the company.”
As per the brokerage report, Divi’s is vertically integrated here too, meaning it makes its own raw materials, including amino acids, building blocks, and protective chemical groups, rather than depending on outside suppliers. Validation batches for peptide fragments have already started this quarter, Jefferies noted in its report.
Jefferies on Divi’s Labs: Target raised
Jefferies raised its Earnings Per Share (EPS) estimates for FY27-29 by 6-11%, citing stronger sales growth and margins.
The brokerage now values the stock at 62 times its Sep-28 EPS, up from 57 times earlier, broadly in line with the sector average.
The brokerage also raised its target price to Rs 10,200, while maintaining its ‘Buy’ recommendation.
It further added, “We maintain our Buy rating on Divi’s as it remains the best-in-class CRDMO franchise in our coverage with high growth visibility for long term and several potential blockbuster pipeline products including complex peptides and GLP.”
Divi’s Labs share price performance
The stock has already climbed 31% in 2026 so far. Its market capitalisation (Mkt cap) stands at 2.21 lakh crore, with a Price-to-Earnings (P/E) ratio of 86.11. The 52-week range has been Rs 5,636.50 to Rs 8,585.
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