Divi’s Laboratories (DIVI) delivered in-line 1QFY22 earnings, led by strong off-take in the Custom Synthesis (CS) segment. The backward integration efforts over the past 2-3 years have fructified at a time when peers are facing issues in terms of raw material and logistics cost increases. In fact, this has led to better profitability for the quarter. DIVI remains well poised in terms of both product development and manufacturing capacity to sustain superior return ratios over the next 4-5 years.

Commenting on the result review, Motilal Oswal Institutional Equities said, "We raise our EPS estimate by 5%/4% for FY22/FY23 factoring in a) operational efficiency, b) higher business opportunities in the Sartans portfolio, and c) enhanced growth prospects in the CS segment. We continue to value DIVI at 36x 12M forward earnings to arrive at Target Price of Rs 5,750. We remain positive on DIVI on the back of a) its strong chemistry skill sets driving opportunities in the CS/Generics segment and b) continued cost reduction in production driving market share and profitability. Reiterate Buy."