Divi’s Labs smashes street expectations as profit zooms 92% in Q3

by 5paisa Research Team Last Updated: 2022-02-11T15:33:59+05:30

Hyderabad-based drugmaker Divi’s Labs has posted robust financials for the three months ended December 31, beating even the most optimistic forecasts of brokerage houses as the company got a tailwind from its oral anti-viral medicine and contract manufacturing operations.

Divi’s Labs said its consolidated net profit shot up 92% to Rs 902 crore from Rs 470 crore in the third quarter ended December 31, 2020. On a sequential basis, the company’s profit after tax rose nearly 60% from Rs 606 crore in the second quarter of the current fiscal year.

Analysts were expecting the company to come out with a profit in the Rs 600-700 crore range.

The business was boosted by strong revenue growth. Revenue jumped 46.5% to Rs 2,493.24 crore for the three months ended December 31, 2021, compared with Rs 1,701.44 crore in the year-ago period. On a sequential basis, revenue was up from Rs 1,987.51 crore in the second quarter.

Divi’s Labs also saw margin expansion as its cost of raw materials grew slower than its revenue.

As a result, cost of raw materials as a percentage of revenue reduced by 380 basis points over the year-ago period and was down 796 bps sequentially to 36.1%.

The company was also able to restrict costs related to staff to under 5% compared with the corresponding period in the previous year, thereby bringing down contribution of employee costs as percentage of revenue.

In addition, the 28% rise in other expenses was also much lower than that of revenue growth, pushing up the margins.

Earnings before interest, tax, depreciation and amortization (EBITDA) for the company shot up 59% year on year to Rs 1,097 crore from Rs 691 crore in Q3 FY21. On a sequential basis, EBITDA rose 34% from Rs 818 crore.

The company’s EBITDA margin expanded by 340 bps from a year earlier to 44% while it rose 285 bps compared with the three months ended September 30.

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