Shares of Divi’s Laboratories Ltd. jumped to a record high, taking the drugmaker’s market capitalisation to beyond Rs 1 lakh crore, as investors continue to bet on greater demand for healthcare and safety products in the aftermath of the Covid-19 pandemic.

The Hyderabad-based company, which listed on the bourses in 2003, has added more than Rs 50,000 crore to its market value this year, riding on the gains in healthcare stocks as demand for certain products rose during the virus outbreak. The rally even defied the worst selloff for equities in more than a decade triggered by the pandemic.

Divi’s Laboratories, one of the world’s largest generic active pharmaceutical ingredient manufacturers, is also the best performer on the Nifty 50 so far this year, gaining more than 100%. It’s the only Nifty 50 constituent to have witnessed a twofold jump in its stock price this year as the benchmarks rebounded to scale new peaks.

“Our reverse DCF (discounted cash flow) calculation suggests that operating cash flow would grow strong at about 24% CAGR over the next 10 years,” ICICI Securities said, as it initiated coverage on the stock on Dec. 8. “A strong positioning of Divi’s will help in monetising growth opportunity in API and CRAMS (contract research and manufacturing services) space, given its stellar execution track record and being one of the preferred suppliers,” the brokerage said in a note.

Divi’s Laboratories entered the Nifty 50 in September this year and has since gained more than 25%.

“We estimate revenue, Ebitda, PAT CAGR of 21%, 28% and 26%, respectively, over FY20-23 with higher demand for API, CRAMS, growth visibility based on planned capex and stable margin profile,” ICICI Securities said.

Macquarie also maintained an ‘outperform’ rating on Divi’s Laboratories, according to its note released on Dec. 16. The research firm also termed the company as one of its top large-cap pick.

Shares of Divi’s Laboratories gained as much as 3.7% in Thursday’s trade to Rs 3,854 apiece. The stock is up for the third straight day.

Of the 22 analysts tracking the stock, 18 have a ‘buy’ rating, three suggest a ‘sell’ and one recommends a ‘hold’.



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