Author :- JMFS Fundamental Research
JM Financial Services' Fundamental Research desk has reiterated its Buy recommendation on Divis Laboratories Ltd. (Divis), setting a 12-month target price of ₹9,510 against a current market price of ₹8,413 (as of August 3, 2026) — implying an upside of roughly 13%. The target is derived by applying a 41x multiple to FY28E EBITDA.
At a market cap of ₹2,23,339 crore, the stock has already delivered strong recent returns — up 19.2% over the past month and 26.7% over the past year — and JMFS's updated thesis is built around a stellar Q1FY27 print that beat Street expectations across the board.
Q1FY27: A Stellar Quarter
Per JMFS's analysis, Divis delivered consolidated revenue growth of 27.8% year-on-year to ₹3,080 crore, driven by strong momentum in custom synthesis and API volumes. More striking was the bottom-line performance: net profit surged 65.5% to ₹902 crore, alongside an EBITDA margin expansion to 40.8% — a combination JMFS attributes to operating leverage, a favourable product mix, and a growing contribution from CDMO (Contract Development and Manufacturing Organisation) sales.
The Core Investment Thesis: CDMO Segment Gaining Traction
The central pillar of JMFS's Buy case is the accelerating CDMO segment, which posted 45% year-on-year growth in the quarter. Key details from the report:
- Divis has already commissioned 18-20 projects, with several more at various stages of clinical development or regulatory filing.
- Validation batches have already been shipped to select customers, with project validation activities on schedule.
- Commercial supplies are expected to begin once customer qualification, regulatory approvals, and/or inspections are completed.
- The company has lined up three major capex projects, each corresponding to a distinct end-market molecule — providing what JMFS describes as ample visibility on forward growth, with likely commercialisation of these 3 molecules over the next year seen as a key catalyst for CDMO sales.
Generics Business: Steady Despite Pressure
Divis's generic API business grew a more modest 6% year-on-year, with JMFS noting this came despite ongoing pricing pressures. Higher generic API prices were largely a function of rising raw material and solvent costs — particularly following geopolitical disruptions — with only select cost increases passed on to customers. JMFS expects these pricing pressures to persist, but believes Divis's strong backward integration supports supply reliability and operational efficiency well enough to help the company navigate the headwind.
Capex Progress: On Track
The company's ₹2,000 crore expansion plan, centred on the three major CDMO-linked projects mentioned above, has already seen 70% of planned investment capitalised. All three projects are currently in the validation stage, and JMFS notes that once approvals come through, each is expected to move into the scaling-up phase.
Financial Summary
|
Particulars (₹ Cr) |
FY26A |
FY27E |
FY28E |
FY29E |
|
Net Sales |
10,560 |
12,713 |
15,818 |
19,113 |
|
Sales Growth (%) |
12.8 |
20.4 |
24.4 |
20.8 |
|
EBITDA |
3,441 |
4,869 |
6,090 |
7,550 |
|
EBITDA Margin (%) |
32.6 |
38.3 |
38.5 |
39.5 |
|
Adjusted Net Profit |
2,642 |
3,386 |
4,145 |
5,225 |
|
Diluted EPS (₹) |
99.5 |
127.5 |
156.1 |
196.8 |
|
RoCE (%) |
17.0 |
22.1 |
23.5 |
24.7 |
|
RoNW (%) |
16.7 |
18.8 |
19.7 |
21.0 |
JMFS forecasts sales and PAT to compound at 22% and 25% respectively over FY26-FY28E, with return ratios (RoCE, RoNW) improving steadily across the forecast period alongside the margin expansion narrative.
Valuation
|
Metric |
FY26A |
FY27E |
FY28E |
FY29E |
|
P/E (x) |
84.6 |
66.0 |
53.9 |
42.7 |
|
P/B (x) |
13.3 |
11.6 |
9.8 |
8.2 |
|
EV/EBITDA (x) |
63.9 |
45.5 |
36.2 |
29.0 |
|
Dividend Yield (%) |
0.0 |
0.0 |
0.0 |
0.0 |
At the current market price, the stock trades at 45.5x FY27E and 36.2x FY28E EV/EBITDA. JMFS applies a 41x multiple to FY28E EBITDA to derive its price target of ₹9,510, framing this as a reasonable multiple given the earnings compounding potential and margin trajectory ahead.
Key Risks Flagged by JMFS
- Supply chain bottlenecks due to ongoing geopolitical issues.
- Delayed regulatory approvals, which could push back the CDMO commercialisation timeline for the three molecules currently in the pipeline.
- Sustained pricing pressure in the generics API business, which could weigh on that segment's margins even as CDMO growth offsets it at the consolidated level.
Rating Definitions (JMFS Research Framework)
|
Rating |
Meaning |
|
Buy |
Total expected return of more than 15% (including dividend yield) |
|
Hold |
Price expected to move between 10% downside and 15% upside |
|
Sell |
Price expected to fall by more than 10% |
Disclaimer: This article summarizes a research report published by JM Financial Services Ltd. (JMFS) as part of its Fundamental Research coverage, dated August 3, 2026. It is intended for informational purposes and does not constitute an offer, solicitation, or personalized investment advice. Investments in securities markets are subject to market risk, and past performance is not indicative of future results. Target prices, earnings estimates, and ratios cited are JMFS Research estimates and are subject to change without notice. Readers should refer to the complete research report and its full disclosures on www.jmfinancialservices.in, and consult their financial advisor, before making investment decisions. JMFS and/or its associates may have a financial interest in the securities mentioned in this report, as disclosed in the original document.
