Divi’s Laboratories and Deepak Fertilisers & Petrochemicals: Weekly Recommendations

The two stocks recommended by SMC Global Securities’ Research Team this week are Divi’s Laboratories and Deepak Fertilisers & Petrochemicals Corporation. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock recommendations for the period between March 31, 2025 and April 4, 2025.

Divi’s Laboratories Limited

Divi’s Laboratories share price is ₹5,753.90 (as on March 28, 2025) and its target price is set at ₹7,008 with an upside potential of 22%.

Divi’s Laboratories Limited: Investment Rationale

• Divi’s Laboratories Ltd. is a Hyderabad-based pharmaceutical powerhouse known for its leadership in Active Pharmaceutical Ingredients (APIs), custom synthesis, and nutraceuticals.
• It serves over 100 countries and operates a robust, backward-integrated business model. Its revenue splits into generics (49%), custom synthesis (41%), and nutraceuticals (10%), giving it diversified streams and a competitive edge in high-margin, complex chemistry.
• In Q3 FY25, revenue increased by 25% year-on-year to ₹2,319 crores, compared to ₹1,855 crores in Q3 FY24, driven by strong demand in custom synthesis and generic APIs.
• Net profit surged by 64.5% to ₹589 crores, up from ₹358 crores in the same quarter last year, reflecting improved operational efficiency and margin expansion. The profit growth outpaced revenue, demonstrating Divi’s effective cost management despite ongoing global inflationary pressures.

• The company has been ramping up its manufacturing footprint, with ongoing investments of ₹2,000-3,000 crore, including a Greenfield facility in Kakinada. The Kakinada Unit 3 development, part of Phase I of the Kakinada facility, began commercial production in January 2025.
• This new facility enhances backward integration and expands manufacturing capabilities. The project is expected to be fully operational in about six months, with the capacity from Units 1 and 2 being freed up as starting materials are shifted to the Kakinada site.
• Divi’s Custom Synthesis business is experiencing strong growth with increased customer engagements, more RFPs, and on-site visits. The company’s long-standing relationships and expertise position it well in this space, with active involvement in multiple projects.
• In the Generic business, despite price pressures, stability is maintained, with expected growth from upcoming patent expirations and new product additions. The current product mix stands at 48% generics and 52% custom synthesis for the nine-month period.
• The management of the company is optimistic about future growth, driven by a strong pipeline and strategic investments, while closely monitoring macroeconomic and geopolitical trends to mitigate risks.
• The EBITDA margin stands at 32%, with a goal of sustainable double-digit growth. Margins are influenced by product mix and operational efficiency initiatives, with expectations of operational leverage as the Kakinada facility ramps up.

Divi’s Laboratories Limited: Shareholding Pattern

The promoters’ shareholding is highest in Divi’s Laboratories at 51.89%.

Divi’s Laboratories Limited: Valuation

The company has reported strong growth, supported by a debt-free balance sheet, strategic expansions, and a leadership position in APIs and CRAMS, enhancing its long-term attractiveness.

Its established customer relationships, technological expertise, and a robust project pipeline position it well for ongoing success in custom synthesis. Despite industry price pressures, the company maintains stability in generics, with growth anticipated from patent expirations and new product introductions.

The ramp-up of the Kakinada facility, alongside operational efficiencies, is expected to drive margin expansion and operational leverage. Thus, it is expected that the stock may see a price target of ₹7,008 in 8 to 10 months’ time frame on current P/BVx of 11.14x and FY26 BVPS of ₹629.11.

Divi’s Laboratories Limited: Risk

• Intensive Competition
• Regulatory Risk

Deepak Fertilisers and Petrochemicals Corporation Limited

Deepak Fertilisers and Petrochemicals Corporation share price is ₹1,111.75 (as on March 28, 2025) and its target price is set at ₹1,337 with an upside potential of 20%.

Deepak Fertilisers and Petrochemicals Corporation Limited: Investment Rationale

• Deepak Fertilisers and Petrochemicals Corporation Ltd. is a manufacturer of industrial chemicals and fertilizers. With a strong presence in Technical Ammonium Nitrate (mining chemicals), Industrial Chemicals and Crop Nutrition (fertilisers), the Company supports critical sectors of the economy such as infrastructure, mining, chemicals, pharmaceutical and agriculture.
• It has plants located in four states, namely Maharashtra (Taloja), Gujarat (Daher), Andhra Pradesh (Srikakulam) and Haryana (Panipat). The company has commenced best in-class Technical Services to drive downstream productivity benefits for the mining end consumers.
• In Q3 FY2025, consolidated revenues have surged by 39% to ₹2,579 crores, driven by good monsoon and the execution of crop-focused value-added strategy. EBITDA margin improved to 19% from 15% as a result, it increased by 72% to ₹486 crores. PAT up by 318% to ₹253 crores.

• On the capex front, the nitric acid project in Dahej and the technical ammonium nitrate project in Gopalpur are expected to go live in H2 FY 2026. It has established distribution networks and customer bases, ensuring a smooth off-take from these projects.
• Currently, the net debt stands at ₹3,250 crores, with expectations of it peaking at ₹5,500 crores by H2 FY 2026 due to ongoing expansions. The management has reassured that strong operational cash flow would help effectively manage debt levels moving forward, ensuring financial stability.
• Its world-scale ammonia plant, operational since August 2023, provides greater control over pricing and product availability. Amid geopolitical uncertainties, this strategic investment enables it to navigate market volatility, ensuring stability and strengthening its competitive edge for all three business segments and the complete value chain.
• Its strategic pivot from commodity products to high-value specialty offerings is powered by robust R&D, consumer insights, and market segmentation. In the Industrial Chemicals sector, it is making strides with products such as steel-grade nitric acid and pharma-grade IPA.
• Its Mining Chemicals business is focused on Total Cost of Ownership (TCO) solutions. In its Crop Nutrition business, it is transitioning from customer to end-consumer, with an expanding portfolio of crop-specific nutrient solutions.
• Recently, the NCLT-approved company’s restructuring and demerger would unlock the full potential of each business unit. By adopting a more focused, end-to-end approach, it will streamline operations, enabling it to pursue strategic alliances and global joint ventures more effectively.

Deepak Fertilisers and Petrochemicals Corporation Limited: Shareholding Pattern

In the overall shareholding of Deepak Fertilisers and Petrochemicals Corporation, promoters have the highest shareholding at 45.63%.

Deepak Fertilisers and Petrochemicals Corporation Limited: Valuation

The company delivered a robust Q3 FY2025, showcasing significant revenue growth and improved margins. Its ongoing corporate restructuring is poised to enhance operational efficiency in the future.

The addition of new capacity, a strategic shift from commodity products to high-value specialty offerings, and the adoption of smart factory initiatives through IT-enabled Sales and Operations Planning (S&OP) systems bode well for DFPCL’s prospects.

Thus, it is expected that the stock may see a price target of ₹1,337 in 8 to 10 months’ time frame on the current P/E of 16.11x and FY26 (E) EPS of ₹83.

Deepak Fertilisers and Petrochemicals Corporation Limited: Risk

• Commodity Price Volatility
• Economic Slowdown

Conclusion

These two stocks, one from the pharmaceutical sector and other from the chemicals sector can reach their target price in the coming 8 to 10 months. However, it is always better if you do your analysis before investing and set a stop-loss target. To keep track of your invested stocks, open a free demat account with SMC Global Securities and invest on the go.

Reference:
https://www.smctradeonline.com/research/wise-money/241

Author: All Content is verified by SMC Global Securities.