DIVISLAB - Divi's Laboratories Ltd. Share Price

Management's outlook reflects a cautious optimism surrounding the company's performance and strategic initiatives. Key forward-looking statements include:

1. Capital Expenditure: Divi's Laboratories anticipates a total capital expenditure for FY2026 to be around Rs.2,000 crores, aimed at expanding capacity and upgrading technologies.

2. Custom Synthesis Growth: The Custom Synthesis segment is identified as a core growth engine with a healthy pipeline of Requests for Proposals (RFPs) and ongoing projects expected to advance to commercial scale within the next 12 to 24 months.

3. Unit 3 Facility Contributions: The Kakinada Unit 3, which began operations in January 2025, is expected to enhance supply reliability and reduce dependency on external suppliers, contributing significantly to the company's backward integration strategy.

4. Financial Performance: In Q1 FY2026, consolidated total income rose to Rs.2,529 crores, compared to Rs.2,197 crores in the same quarter the previous year. Profit before tax increased to Rs.733 crores from Rs.604 crores year-on-year.

5. Market Position: Management emphasized its ongoing market leadership in generics despite pricing pressures, underlined by a robust backward integration model that ensures cost structure stability and supply reliability.

6. Sustainable Practices: The company reaffirms its commitment to sustainable practices, integrating green chemistry principles in operations to optimize resource use and reduce environmental footprint.

7. Scientific Capabilities Expansion: The introduction of advanced platforms like flow chemistry, biocatalysis, and the new Solid Phase Peptide Synthesis capacity signals innovative growth avenues, particularly in peptide treatments.

These points highlight management's strategic direction in navigating market challenges while focusing on long-term sustainable growth and operational resilience.

Question 1: Tushar Manudhane: Considering the generic custom synthesis ratio with the API segment seems to be lower for the quarter. Despite that, the gross margin is lower sequentially. Can you throw some light on this aspect?

Answer: The generics to custom synthesis ratio is 47% to 53% this quarter. The generics business had a higher component compared to custom synthesis. However, fluctuations in this ratio can occur, as there's variability each quarter. Our goal is a balanced ratio but fluctuations can happen throughout the year.

Question 2: Tushar Manudhane: Can you elaborate on the work happening in biocatalysis?

Answer: We are actively working on biocatalysis, focusing on pilot-scale projects with innovators. However, I cannot disclose specific details due to confidentiality agreements. The focus is on developing and adapting our capabilities to evolving market needs.

Question 3: Kunal Dhamesha: Is the generic business 53% of revenue this quarter or 47%?

Answer: The generics business is 47% of revenue this quarter. Pricing pressures continue to impact our gross margins, compounded by logistical costs arising from ongoing geopolitical issues.

Question 4: Kunal Dhamesha: How about the status of peptide capacity?

Answer: We have added capacity for both pilot work and commercialization of Tetramers and Octamers. The qualification process and regulatory approvals are ongoing, which means commercial supplies will follow once these are completed.

Question 5: Damayanti Kerai: For Kakinada, how long for customer supplies after gaining GMP approvals?

Answer: Kakinada currently utilizes its capacity mainly for backward integration. We expect GMP approvals to take 1 to 2 years. Our immediate focus is on ensuring capacity is applied effectively while awaiting those approvals.

Question 6: Shyam Srinivasan: How will shipments vary for valsartan and Sacubitril plus Valsartan now that it's gone generic in the U.S.?

Answer: I cannot comment on specific products. However, our longstanding relationships and contracts allow us to adapt to market changes while supporting our customers' needs.

Question 7: Neha: What solutions stabilize generic pricing pressure?

Answer: Stabilization hinges on correcting market dynamics, including supply chain issues and shifts in pharmaceutical insurance strategies. We remain optimistic about current positioning, but precise timing for stabilization is uncertain.

Question 8: Abdulkader Puranwala: How are innovators responding to U.S. focus on captive manufacturing?

Answer: Currently, we haven't seen concerns from innovators regarding this trend. We maintain strong, long-term contracts which offer stability, essential in navigating any regulatory changes or tariffs that might arise.

Question 9: Abhigyan Srivastav: What is the timeline for the new product pipeline?

Answer: We have several products like Brivaracetam and Ticagrelor in our pipeline awaiting customer approvals. We expect commercial volumes to start moving in the next 6 to 12 months.

Question 10: Sucrit Patil: How is Divi's integrating green chemistry and ESG principles?

Answer: Divi's has embedded green chemistry into operations, achieving 90-95% solvent recovery. This focus not only enhances efficiency and reduces waste but strengthens our competitive edge in custom synthesis and APIs in the market over the next five years.