Divis Laboratories Announces Major Capacity Expansion

It’s a wild day in the Indian stock market on the eve of April Futures & Options (F&O) series expiry, with major indices swinging up and down. But amidst this turbulence, there’s one sector standing tall—Nifty Pharma. The pharma index has edged up by 0.42%, and one stock that’s caught everyone’s attention is Divis Laboratories Ltd. The stock is up by 0.36%, breaking past its early-April high of Rs 3,822. In fact, it’s bounced back by more than Rs 30 from the day’s low.

So, why is Divis Laboratories showing such resilience and breaking new ground? 

The company just announced a major step: it’s entering a long-term supply agreement with a customer. Additionally, it’s planning a significant expansion at one of its manufacturing facilities, with a proposed investment of Rs 650 to Rs 700 crore, funded from internal cash flows. The new facility is expected to be operational by January 2027. However, due to a confidentiality agreement with the customer, Divis Laboratories can’t share further details about the deal.

Is Divis Laboratories Worth Watching?

Despite today’s upward trend, Divis Laboratories hasn’t had the best year so far. The stock has dipped by almost 2% in 2024, partly due to lower earnings and a decline in margins, dropping below pre-COVID levels. The dip is also linked to weaker pricing for active pharmaceutical ingredients. However, things are looking up with the company’s new capacity investments and enhanced capabilities, indicating a turnaround in the latter half of FY25.

The worst might be over for Divis Laboratories, and the company’s relative valuation premium has narrowed significantly. If you’re looking for a stock with strong growth prospects, Divis might be worth keeping on your watchlist.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.