Pharma stock to buy now for an upside of up to 25%; Recommended by Jefferies and HSBC

Synopsis: Brokerages remain constructive on Divi’s Laboratories despite near-term profit moderation. While Q3FY26 revenue rose 12% YoY to Rs 2,604 crore, PAT marginally declined to Rs 583 crore. Jefferies and HSBC see strong upside driven by custom synthesis growth, CDMO visibility and margin resilience, supporting upto 27% potential appreciation.

Divi’s Laboratories continues to enjoy strong brokerage ratings despite a high earnings multiple of 65x as against the group average of 30x. Jefferies Global Research, HSBC Global Research, and Motilal Oswal have a positive rating on the stock. They have highlighted the momentum in the custom synthesis business and the improving product mix. 

They are also positive on the long-term CDMO story. The broking firms have high expectations from the firm due to their high efficiency, niche focus on the high-margin segment of the industry and increasing global demand.

With the market cap of Rs 1,64,500 crore, the shares of Divis Laboratories Ltd are trading at a price of Rs 6,196. The shares are trading at a PE of 65, whereas its industry PE is at 30. The shares have given a return of 67% over the last 5 years. 

Motilal Oswal on Divi’s Labs 

The stock has been recommended to hold with a target price of Rs 6,925 by Motilal Oswal, indicating that the stock has an upside potential of nearly 7% with reference to the previous closing price of Rs 6,474.50. The broker reported that revenues grew by 12% YoY; however, the pricing environment for generics remains challenged.

Operationally, performance was healthy, with gross margin expansion of 350 bps and an impressive EBITDA margin of 34.2%, ahead of consensus. The benefits were driven by both better product mix and currency benefits. However, MOSL is taking a cautionary approach towards their ability to sustain margins, alongside their assessment that valuation reflects most of the positives.

Jefferies on Divi’s Labs 

Jefferies has a buy recommendation on the company, and the current target price stands at Rs. 8,100, which reflects the potential upside of around 25% from its current price. The revenue is in line with expectations; meanwhile, EBITDA and PBT exceed the estimate, which reflects good operating efficiency.

The broker has pointed to strong growth rates of 15% for custom synthesis/nutraceuticals, alongside 3 CDMO projects which they expect to start contributing from H2CY27. While generics growth has slowed, Jefferies believes there’s strong medium-term earnings visibility due to strong high-margin business.

HSBC on Divi’s Labs

HSBC has reiterated a Buy rating with a target price of Rs 7,800, indicating an upside of 20% from the previous close of Rs 6,474.50. The broker said that a favourable revenue mix drove gross and EBITDA margin beats in 3QFY26.

HSBC keeps its confidence for the custom synthesis segment, based on increasing customer interest in peptides and development in three dedicated projects to underscore long-term growth.

Financials 

The revenue from operations for the company stood at Rs 2,604 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 2,319 crores, up by about 12 per cent YoY. However, the net profit stood at Rs 583 crore in Q3 FY26, down compared to the Rs 589 crore profit in Q3 FY25.

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