DIVISLAB - Divi's Laboratories Ltd. Share Price

In the earnings conference call held on November 7, 2025, the management of Divi's Laboratories provided an optimistic outlook for the company's future amidst various market challenges. Dr. Kiran S. Divi, the CEO, highlighted the resilience in their operations, noting a consistent performance across all business segments despite ongoing pricing pressures in the generics space.

Key Forward-Looking Points:

1. Revenue Growth: The company reported a consolidated total income of Rs.2,860 crores for Q2 FY2026, up 17% from Rs.2,444 crores in Q2 FY2025. For the first half of FY2026, total income grew 16% to Rs.5,389 crores. Constant currency revenue growth for Q2 was 10.79%, and for the half year, it stood at 12.3%.

2. Custom Synthesis and Peptide Development: The management acknowledged a steady flow of requests for proposals (RFPs) and site visits. They have multiple custom synthesis projects advancing to development stages, with some expected to enter commercial manufacturing within 1-2 years. The peptide center of excellence is now operational, with ongoing engagements in various stages for multiple projects involving major pharmaceutical companies.

3. Capex and Investment: The capex guidance for FY2026 has been revised upwards from Rs.2,000 crores, reflecting ongoing investments in strategic initiatives and capacity expansions. Management indicated that several new projects are in the pipeline, necessitating further investments.

4. Market Conditions: The management noted ongoing pricing pressures in generics but expressed confidence that volumes remained stable with no loss of customers. The expectation is that stabilization could occur in the coming quarters, which may lead to a return to normal pricing levels.

5. Community Initiatives: On social responsibility, Divi's is making significant contributions, reaching over 800,000 people with safe drinking water initiatives.

Overall, the management projected a positive trajectory driven by strategic investments, continued demand in custom synthesis, and efforts to manage and stabilize pricing pressures in their generics portfolio.

Question: "Is it possible for the management to guide us how much volumes which we are currently supplying would be linked to these patent expiring in two regions?"

Answer: I'm sorry, I cannot comment on any specific product, customer impact or volumes due to confidentiality agreements. While I understand your inquiry involves specific patents expiring in the U.S. and EU, I'm unable to provide details on those particular aspects.

Question: "When can we see the revival happening in the generic side of the business? And is the pricing pressure still positive in the business at present?"

Answer: We are indeed facing pricing pressures on generic molecules, yet we've not lost any customer or volume. Our backward integration, especially with our Kakinada facility, aids in managing costs and maintaining volume. We hope to see stabilization in pricing pressures in the coming quarters, which may lead to a revival in our generic business.

Question: "Considering we have large capacities available with us, does it give us an edge to compete in terms of pricing?"

Answer: Divi's has a longstanding presence in custom synthesis, establishing strong customer relationships and supply chain management. While capacity is a factor, multinational customers also prioritize EHS standards and sustainability, making pricing just one of multiple factors in their decision-making process.

Question: "Is second half going to be more or less muted? Or are we going to raise the capex guidance further for FY26?"

Answer: Yes, we expect the capex for FY26 to exceed Rs.2,000 crores as we are involved in several new projects that require this investment. The ongoing assessments will dictate our capacity expansions across our three Units based on project stages.

Question: "So what would it entail in terms of investment, capacities, differentiation, from the longer-term perspective regarding peptides?"

Answer: We've been in peptide manufacturing for 20 years, allowing us to control supply, consistency, and impurity profiles. While I cannot disclose specific investment details due to customer confidentiality agreements, our newly opened center of excellence allows us to meet increasing customer demands and expand our peptide capabilities.

Question: "How does the shifting revenue mix between custom synthesis and generics affect your gross margins?"

Answer: The gross margin varies with product mix, and while custom synthesis has increased as a percentage, it doesn't automatically guarantee higher margins due to ongoing pressures in the generics sector. Maintaining volumes in generics has impacted aggregate margins, so overall performance is linked to the total product mix.

Question: "Is the current capacity utilization at Unit 3 satisfactory across all units?"

Answer: The shifting process of products from Units 1 and 2 to Unit 3 is ongoing. Six production blocks are operational, and we plan to transfer more products as we complete other blocks, enhancing our overall capacity and efficiency.

Question: "What updates can you provide on the GMP qualifications for Unit 3?"

Answer: Currently, we are manufacturing starting materials at Unit 3, with plans underway to qualify for GMP. We aim to submit Drug Master Files for some in-house APIs in the near future, focusing first on meeting internal demands before expanding further.

Question: "Can you discuss the potential impact of U.S. pharmaceutical capex on Divi's business?"

Answer: We have not observed any negative effects from U.S. pharmaceutical companies increasing their capex. Our relationships remain strong, and we have not lost customers. Thus, our business trajectory remains unaffected at this time.

Question: "What is the anticipated timeline for the commencement of the three projects announced to the stock exchanges?"

Answer: The three projects are at different stages, with some still installing equipment and others in validation. Generally, we anticipate starting to see revenues in the next 1 to 2 years, subject to regulatory approvals.