Stock Check: Divi’s Laboratories share price hits 52-week high; analysts see more upside after 55% rally YTD

Stock Check: This week, Divi's Laboratories share price has garnered attention following Citi Research's initiation of a ‘buy’ rating on the stock, setting a target price of ₹6,400. Over the course of one week, Divi's Laboratories share price has experienced a 12.02% increase, and year-to-date (YTD), the stock has seen a significant surge of over 55%. Divi's Laboratories share price today surged nearly 3% to touch a 52-week high at ₹6,106.50 apiece on BSE, the pharma stock opened at an intraday low of ₹5,952.05 per share.

Ruchit Jain, Lead Research Analyst at 5paisa, highlighted that the immediate near-term hurdle for the Divi's Laboratories share price is around ₹6,150 as per retracements. If the stock manages to surpass that, then it can continue this rally up to ₹7,000 in midterm.

Preferred Pick in India Pharma

According to a recent report from Citi Research, Divi's Laboratories has established itself in the GLP-1 APIs, positioning the company for potential revenues exceeding US$800 million by CY30E. The report delves deeply into the landscape of Glucagon-like peptide-1 (GLP-1) active pharmaceutical ingredients (API) to highlight this. Divi's Laboratories is expected to benefit significantly from the trend of supply chain diversification, as evidenced by the confidence shown by innovators in the company. This is reflected in the addition of new names such as Ribociclib and Upadacitinib to Divi's Laboratories' portfolio in the CS business.

The brokerage also noted that Eli Lilly, as the innovator, is experiencing high demand and is taking actions to broaden its supply chain. This is in line with the progress on the US Biosecure Act. Due to its ability to scale up at an industrial level, Divi's Laboratories has the potential to become a significant player. According to the brokerage, European contract development and manufacturing organisations (CDMOs) will still be important but might struggle to keep up with demand because of the high costs and difficulties in commercialising larger capacities.

"The US Biosecure Act (irrespective of its strictness) is expected to work as a catalyst for innovators to diversify supply chains. As more and more innovators show confidence in Divi's Laboratories, it has the potential to become a prominent player in chemistry-based CDMO projects, in our view," Citi Research said.

Valuations

Divi's Laboratories has seen a YTD increase of about 40% as per the brokerage's report (dated on October 8), attributed to advancements in the US Biosecure Act. It is currently trading approximately 20% higher than its historical premium over NSE Pharma.

“We assign 40x EV/EBITDA multiple to the company’s Sept’26E EBITDA to arrive at target price of ₹6,400. Our target multiple (40x) is c30% premium to the company’s past 5-yr mean and we believe valuations are likely to continue to remain elevated for the stock as global innovators are diversifying their supply base and it’s apparent that Divi's Laboratories is turning out to be one of the key beneficiaries,” the brokerage said.

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