Divi’s Laboratories (DIVISLAB) Q4 09/10 earnings summary

Executive summary

• FY10 net sales fell 22% YoY to ₹929.28 crore and PAT declined 19% to ₹344.20 crore, mainly as customers continued inventory destocking amid the global slowdown.

• Management saw destocking nearing completion and said Q4 results reflected early business normalization; exports remained the core revenue source at 91% of turnover.

Financial highlights

• Total income declined 21% to ₹959.98 crore; PBDIT fell 14% to ₹442.55 crore and PBT fell 15% to ₹388.34 crore.

• Basic EPS was ₹26.40 and diluted EPS ₹26.35, versus ₹32.79 and ₹32.46, respectively; prior-year EPS was recomputed for the 1:1 bonus issue.

• Other income rose to ₹30.70 crore from ₹23.01 crore, including ₹11.38 crore dividend income, ₹6.12 crore contract research fees and ₹3.60 crore forex gain.

• Consolidated net profit after tax declined 18% to ₹340.33 crore from ₹416.64 crore; consolidated basic and diluted EPS were ₹26.11 and ₹26.06.

Outlook and guidance

• Customer inventory rationalization was viewed as largely complete, with business normalization expected; Q4 performance was cited as evidence of the trend.

• Existing capacity was expected to approach full utilization toward the end of FY11; a new ₹200 crore SEZ unit was targeted for completion by FY11-end.

• US and Swiss nutraceutical subsidiaries expected to break even within 12 months, supported by customer growth, product launches, distribution expansion and parent funding.