Divi's Laboratories — Q2 FY24
Divis Laboratories reported Q2 FY24 consolidated PAT of INR 348 crore on total income of INR 1,995 crore, with export share at 87%.
neutral
medium
✓ Verified against BSE filing
Claim Ledger
Did management answer the analysts?
Every material analyst question, graded on whether management actually answered it — with the verbatim exchange and quantitative claims checked against filed numbers.
63%Questions answered3Evaded / deflected12Questions auditedContradictedNumbers vs filing
Partial answer
Medium priority
How is the INR 20 crore inventory write-off different from typical quarters?
Asked by Tushar Manudhane, Motilal Oswal Financial Services
Management identified the source but did not compare to historical write-offs.
incomplete answerno comparison to typical write-offs
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Question
So just on, firstly, on this inventory write-off of INR 20 crore, so how different is this from a typical, over past many quarters?
Murali K. Divi, Managing Director
These are some of the materials that were left over from the COVID drugs, so that's what they were, and we didn't then-
Evasive
High priority
What OpEx should be expected when Unit Three commercializes in Q1 FY25?
Asked by Tushar Manudhane, Motilal Oswal Financial Services
Management gave qualitative direction but no specific cost estimate despite follow-up.
no number givenvague guidance
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Question
With respect to Unit Three, where the construction is currently ongoing, but is going, the production is expected to commence from first quarter FY 2025. So what kind of operational cost one should build in?
Murali K. Divi, Managing Director
The operational expenses will definitely go up because we have created, the, we are creating a total setup of Unit Three with all infrastructure, so hence there will be increase in operational, expenditure. And also it will be directly proportional to volume of business we are going to load into that by quarter-on-quarter.
Answered
High priority
What drove the strong like-to-like custom synthesis growth?
Asked by Surya Patra, PhillipCapital India
Management explained growth drivers: Big Pharma projects and resumed non-COVID projects.
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Question
What has driven this, custom synthesis growth, sir? This custom synthesis segment is not facing any kind of inventory rationalization or anything. Is that the kind of, understanding one should have? And, even if you have seen a very strong robust growth on a like-to-like basis in custom synthesis, what has driven?
Murali K. Divi, Managing Director
The custom synthesis growth is not just one company or one product, it is distributed over several therapeutic segments. I think we mentioned that one of the growth engine is the big custom synthesis projects from the Big Pharma, two of them. Now, both are geared up, and they are fully on production line, and you will see the additions in the next quarters.
Partial answer
High priority
Why did gross margin deteriorate 400-500 bps despite strong custom synthesis?
Asked by Surya Patra, PhillipCapital India
Management cited pricing pressure and stage starts but did not quantify the impact on margin.
no quantificationvague attribution
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Question
But then sequentially, we have seen the gross margin has deteriorated, almost like 400-500 basis point, despite the strong performance at the custom synthesis side. Is it because of your the high cost inventory or raw material that you have been talking about, that is still hitting us, or it is the realization in the API side that really suffered?
Murali K. Divi, Managing Director
I think Nilima has mentioned the pricing pressure. Yes, there are pricing pressures in the generic, and there's no issue with the custom synthesis. And overall, probably some of the stage starts towards the end of consumption has already happened. All that happened, I think, together. So I think going forward, we should be doing better.
Answered
High priority
Is Divi's insulated from CDMO industry slowdown due to late-stage focus?
Asked by Surya Patra, PhillipCapital India
Management confirmed they work with Big Pharma and are not seeing slowdown.
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Question
But here, as we know that Divi's is largely known for in the CMO or CDMO, it is for the late-stage projects, and we have seen a very strong growth in the custom synthesis this quarter. So, is it fair to believe that since we are associated with the late-stage projects, we have not seen any kind of industry challenges in terms of inventory or slower pickup by the customers and all that.
Murali K. Divi, Managing Director
We are not working with, you know, that the startup companies and- Small companies needing funding from various institutions. We are working Big Pharmas, either for their pipeline or the pipeline they acquired from some of these small companies. We are not seeing any of that slowdown, we're seeing number of opportunities.
Evasive
High priority
What is the ex-COVID growth rate and custom synthesis base?
Asked by Shyam Srinivasan, Goldman Sachs
Management refused to provide specific numbers for Molnupiravir sales or custom synthesis growth.
declined to disclosenon-disclosure agreement cited
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Question
So if you could help me understand that, please. Thank you.
Nilima Prasad Divi, Whole-Time Director (Commercial)
So, you can assume that, you know, the Molnupiravir sales could be around the number that you're mentioning, but we cannot because of the non-disclosure that we signed, we cannot disclose the actual value of the sales that we have done for that particular product.
Declined
High priority
Can you bifurcate ex-COVID growth between generic and custom?
Asked by Shyam Srinivasan, Goldman Sachs
Management explicitly declined to provide the requested bifurcation.
refused to provide breakdown
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Question
If you could just bifurcate that between generic and custom, any directional color, that will be helpful.
Nilima Prasad Divi, Whole-Time Director (Commercial)
I would love to do that, but at this point in time, we are not, you know- We cannot say more than what I'm saying currently.
Answered
Medium priority
What are the volume trends in generic API despite pricing pressure?
Asked by Shyam Srinivasan, Goldman Sachs
Management confirmed good volume trends and explained revenue impact of pricing pressure.
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Question
So is there very good volume trends we are seeing on generic API?
Nilima Prasad Divi, Whole-Time Director (Commercial)
Yes, I would say we are seeing good volume trends in generic API, but yes, because of the pricing pressure, the revenue, which we would have, say, like for example, last year prices, if we would have had this year, the revenue would have been much better.
Answered
High priority
What is the progress on iodine and gadolinium contrast media?
Asked by Damayanti Kerai, HSBC
Management provided specific progress on both iodine and gadolinium products.
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Question
So can you elaborate bit like what is the progress in the iodine-based supply so far? And what is the progress on the gadolinium-based product development part?
Murali K. Divi, Managing Director
The iodine-based contrast media, we are doing well. We are already in the two products for the generic market, Iopamidol and Iohexol, they are growing well. And also, we're entering into the other iodine-based compounds. At least two of them, they are going to be doing very well. On the gadolinium, just we are in the final stages of completing our process, and once that is done, we need to get approval from the customers to go.
Answered
High priority
Have the two big custom synthesis projects gone commercial?
Asked by Ravi Purohit, Securities Investment Management Private Limited
Management confirmed the projects are in full-scale production.
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Question
One is, I think in the earlier calls, you mentioned about a couple of our projects going, you know, commercial in the custom synthesis side in Q1, Q2 of this year. So have they kind of gone into production mode or, we are still kind of, you know, waiting for that?
Murali K. Divi, Managing Director
Yeah, I think I did mention in the beginning of the call that the 2 big custom synthesis projects, they have gone on full scale production now. We reached that, which you will see in the coming quarters, the results of it.
Answered
High priority
What is the progress on peptide drugs and opportunity size?
Asked by Ravi Purohit, Securities Investment Management Private Limited
Management described progress and opportunity in peptide building blocks.
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Question
And second question was on the peptide drugs, which I think we had briefly discussed in the last call as well, and you had said that we were doing basic amino acids, so any, any progress on that? Because that opportunity seems to become bigger and bigger as, you know, time passes by.
Murali K. Divi, Managing Director
I think we are going to have excellent opportunity based on these GLP agonists, the glutides, the type 2 diabetes going towards the weight loss. All of them requiring large number of peptide building blocks, dipeptides, tripeptides. I think this is where we have done a lot of progress, and we will become one of the major suppliers very soon.
Partial answer
Medium priority
What drove the 15% QoQ growth in carotenoid/nutraceutical sales?
Asked by Charul Agrawal, Bank of America
Management did not clarify whether growth was price or volume driven.
no clear attribution to price vs volume
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Question
Sir, this quarter we also saw an increase in sales for the carotenoid products by around 15%, and given the carotenoids were already at 90%-95% capacity, would this be more price driven or is there something else that is going there?
Murali K. Divi, Managing Director
The nutraceutical growth, I think 10%-15%, which has been happening, and there are not too many players in the product we are in. More so in the animal nutrition, the complex astaxanthin and compound, we are now getting to be... We are almost the major players now.
Quantitative claims vs filed numbers
| Claim | Management said | Filing | Verdict |
|---|---|---|---|
| Generic API revenue INR 940 crore for Q2 FY24 | ₹940 cr | ₹1,909 cr | Understated vs filing |
Filed figures sourced from Screener.in. Claims within a small tolerance of the filing are marked “matches filing”.