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On Wednesday, Macquarie initiated coverage on Divi’s Laboratories Ltd (DIVI:IN) with an Outperform rating and set a price target of INR7,400.00. The firm’s analysis anticipates a significant uptick in the company’s financial performance, projecting a more than threefold increase in top-line revenue by the fiscal year ending in 2030 (FY30E) and a doubling of profit after tax (PAT) by FY27E, with expectations for it to quadruple by FY30E.
The positive outlook is based on several factors, including the scaling up of multiple custom synthesis products, the introduction of new generic Active Pharmaceutical (TADAWUL:2070) Ingredients (APIs), and the benefits of operating leverage. Macquarie’s forecasts for revenue, EBITDA, and earnings are 6-14% higher than the current Bloomberg consensus estimates for FY26/27e.
The analyst at Macquarie highlighted the custom synthesis business as a key growth driver for Divi’s Laboratories, citing the manufacturing of GLP-1, contrast media APIs, and the ramp-up of Valsartan-Sacubitril as significant contributors. In addition to revenue growth, the firm expects Divi’s Laboratories to experience a strong improvement in profitability, which will be reflected in enhanced return ratios. The projected Return on Invested Capital (ROIC) is set to improve from 20% in FY24 to over 35% by FY30E.
The market’s response to this coverage initiation by Macquarie is yet to be seen, as the firm’s analysis presents a bullish stance on the future performance of Divi’s Laboratories, underpinned by strategic business expansions and operational efficiencies.
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