Divi's Laboratories: revenue accelerated to +35.4%, but the 45.2% margin leans on a weak year-ago base

The company reported results for the second quarter of fiscal 2027 (July-September 2026) on 30 September 2026: revenue of INR 36,760 mn (+35.4% YoY), EBITDA of INR 15,660 mn (+89.7%) and net profit of INR 11,270 mn (+63.6%). Growth accelerated from +27.8% in the prior quarter, and the EBITDA margin rose to 45.2% from 32.2% a year earlier. Our conclusion: rather attractive – the portal's model puts upside to fair value at +13%, even though at EV/EBITDA LTM of 65.7 the share trades 30% above its own three-year average of 50.7. Our view: the share is rather attractive at the current price; upside on the portal model +13%.

Our view: is there upside

Our view in numbers

Key takeaways

— Revenue rose 35.4% and accelerated from 27.8% in the prior quarter

— EBITDA grew 89.7% – almost twice as fast as revenue – lifting the margin to 45.2%

— Net profit rose 63.6% but lagged EBITDA because of weaker dynamics below the operating line

— The company sits on net cash of INR 2,990 mn, not debt

— A dividend yield of 0.26% is too small to influence valuation

— EV/EBITDA LTM of 65.7 is 30% above its own three-year average of 50.7 – the share is more expensive than its history

— The portal's model implies +13% upside to fair value, which outweighs the rich history

Key figures, INR bn

Revenue rose 35.4% and accelerated from 27.8% in the prior quarter

Revenue in the second quarter of fiscal 2027 was INR 36,760 mn, up 35.4% from a year earlier. Growth in the prior quarter was 27.8%, so the pace accelerated. Sequentially, revenue rose by INR 5,960 mn from the first quarter of fiscal 2027.

The acceleration comes off a low base: a year earlier revenue was INR 27,150 mn and growth was 16.1%. The company is now lapping a weaker quarter, which magnifies the percentage gain. Even without the base effect, the absolute quarterly revenue level is the highest in the last eight quarters.

EBITDA grew 89.7% – almost twice as fast as revenue – lifting the margin to 45.2%

EBITDA for the reported quarter was INR 15,660 mn versus INR 8,750 mn a year earlier, up 89.7%. The EBITDA margin rose to 45.2% from 32.2% in the same quarter last year. Operating profit increased to INR 14,240 mn from INR 7,750 mn.

EBITDA outgrowing revenue means costs rose more slowly than income. The company does not disclose which cost line produced this effect, so we stick to the fact: with revenue up 35.4%, EBITDA rose 89.7%, the best margin in the last eight quarters.

Net profit rose 63.6% but lagged EBITDA because of weaker dynamics below the operating line

Net profit was INR 11,270 mn versus INR 6,890 mn a year earlier, up 63.6%. That is noticeably slower than EBITDA growth of 89.7%, so dynamics below the operating line were weaker. The net margin rose to 30.7% from 25.4%.

The gap between EBITDA and net profit – INR 4,370 mn – covers depreciation, interest and tax. The company does not disclose the breakdown, so we cannot say which line absorbed part of the growth. What matters is that profit still grew faster than revenue and the margin improved.

The company sits on net cash of INR 2,990 mn, not debt

As of 30 September 2026, the company had net cash of INR 2,990 mn, meaning cash exceeded debt. The net debt to EBITDA LTM ratio is negative at -0.06, so there is no leverage.

A year earlier, on 30 September 2025, net cash was INR 31,720 mn. It fell by INR 28,700 mn over the year. On 31 March 2026 it stood at INR 1,230 mn, so it rose by INR 1,760 mn over six months. The annual decline reflects spending, not rising debt.

A dividend yield of 0.26% is too small to influence valuation

The trailing 12-month dividend yield is 0.26%. At a market capitalisation of INR 3,070,282 mn, that is about INR 7,980 mn of payouts. Against LTM net profit of INR 33,630 mn, that is a small share – around 24%.

A yield of 0.26% is not comparable to the key rate and cannot support the share. The dividend here is more a signal than an income source. Valuation is driven by profit growth and multiples, not by the payout.

EV/EBITDA LTM of 65.7 is 30% above its own three-year average of 50.7 – the share is more expensive than its history

EV/EBITDA LTM is 65.7 against its own three-year average of 50.7, a 30% premium to history. P/E LTM is 91.3. The market values the company well above its three-year average.

Such a premium means current growth is largely priced in. To justify the multiple, the company must sustain high margins and revenue acceleration. If growth slows, the multiple will compress toward its historical level.

The portal's model implies +13% upside to fair value, which outweighs the rich history

The portal's model puts fair value 13% above the current price. The model is based on EBITDA growth and a target multiple. This is our own calculation, not a market consensus.

Upside of +13% is moderate. It is smaller than the 30% premium to the historical multiple, meaning the model already accounts for part of the growth. For an investor this means there is some cushion, but it is thin and depends on sustaining current momentum.

Valuation on the latest reported figures

Bottom line

The strong part of the report was revenue acceleration to 35.4% and EBITDA growth of 89.7% with a 45.2% margin. The weak part was net profit growing only 63.6%, and net cash falling from INR 31,720 mn to INR 2,990 mn over the year. The key question for a holder is whether the 45.2% margin holds and whether growth justifies the 30% premium to the historical multiple. Our conclusion: rather attractive – the portal's model implies +13% upside. Our view: the share is rather attractive at the current price; upside on the portal model +13%.