Shares of Divi’s Labs fell after its second-quarter results. Should you buy, sell or hold?

Divi’s 2QFY22 revenue/EBITDA missed Jefferies’ estimates by 2%/3% but PAT outpaced lower taxes. “The stock trades at an expensive valuation, and we don’t see a major upside for the stock from here on out. We downgrade our rating on hold. Our Value Drives Target ₹from 5,624 ₹5,563,” it said in a note.

According to Divi’s management commentary, the COVID anti-viral drug formulation opportunity is worth USD70bn, where Merck’s molnupiravir was the prime candidate. But an interim study released by Pfizer last week showed that its candidate paxlovid was found to reduce Covid hospitalizations and deaths by 89%, which poses a risk to Divi’s mollupiravir prospects, according to Jefferies. Can do.

In Jefferies’ view, Divi’s 2Q margin was sustained on product mix and upfront purchases of inventory, but continued high prices of key raw materials would ultimately hit the firm. “We now do not see any case for improvement in the margin profile for Divi and it is best for the firm to maintain its current margin trends,” the note said.

Another brokerage Ambit Capital has . The stock has a SELL rating with a price target of ₹4,300. “2Q results indicate limited upside for earnings in the near-term, although management’s comment on the potential scale of the global market for COVID-19 anti-viral drugs and the company’s ability to target opportunities beyond molnupiravir means that Business may continue to see above- normal growth in the medium term,” the brokerage note said.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.