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Divi’s Laboratories (DIVI) Q1FY27 EBITDA growth of 72% YoY strongly beat our estimates by 48%. Revenues were largely aided by CS segment and currency tailwind. Mgmt cited that revenue growth in CS was aided by commencement of three capex projects entering validation stage. Further inventory gains also aided higher GMs. We expect margins and CS revenues to accelerate in FY27/28 with GLP based opportunities. Our FY27E/FY28E EPS estimates stand increased by 7-9%. We expect 25% EBITDA and PAT CAGR over FY26-28E. At CMP, stock is trading at 57x FY28E EPS. We Maintain our ‘Accumulate’ rating with revised TP of INR 8,600/share

Strong revenue growth aided by CS segment:

DIVI’s Q1FY27 revenues came in at INR 31bn (up 28% YoY); beat our estimates. Generic revenues came at INR 9.3bn; up 6% YoY while Custom synthesis (CS) grew by 45% YoY at INR 18.5bn. In Q1FY27 overall exports stood at 90% and exports to EU and US stood at 75% of revenue. Product mix for generics and CS in Q1FY27 were at 40% and 60% of revenue. Nutraceutical business for Q1 was INR 2.98bn, up 19% YoY.

EBITDA beat; OPMs at 41%:

GM higher at 67.9%; up 766 bps YoY and 751bps QoQ above our estimates. We believe there were some inventory gain which aided GMs. Employee expenses grew by 20% YoY whereas other expenses were up 12% YoY. EBITDA stood at INR 12.6bn up 72% YoY vs our estimate of INR 8.5bn. OPM stood at 41%, up 1050bps YoY and 775bps QoQ. There was a forex loss of INR 70mn. Tax rate was at 23.6%. Adj for forex PAT came in at INR 9.1bn; up 66% YoY; vs our estimate of INR 6bn.

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