Divis Laboratories Ltd Q4 FY26 Results Analysis: Revenue Grows 12.8%, Margin Compresses 130 bps

Divis Laboratories Ltd's Q4 FY26 numbers came in mixed, with revenue of Rs. 2,831.00 Cr (+9.50% YoY) and PAT growth of +13.40% YoY. Here's a quick read of what worked, what to watch, and what management said.

Quarter Snapshot

DIVISLAB delivered inline revenue growth of 12.8% for FY26, meeting its double-digit guidance, with Custom Synthesis mix expanding to 56% — a strategic positive. However, material cost inflation of 30.4% YoY compressed EBITDA margins by 130 bps, with the full-year margin of 31.9% slightly below the 32-33% target. Heavy capex of Rs.2,520 Cr (exceeding guidance by 32.6%) signals confidence in future growth but compressed near-term FCF.

Key Investment Insights

Key Positives

• FY26 revenue grew 12.8% YoY to Rs.10,560 Cr, meeting double-digit growth guidance
• Q4 PAT grew 13.4% YoY to Rs.751 Cr; FY26 PAT grew 17.2% YoY to Rs.2,568 Cr
• Custom Synthesis mix expanded to ~56% of revenue, validating strategic pivot
• Operating cash flow of Rs.2,738 Cr exceeded PAT (OCF/PAT 1.07x), indicating strong earnings quality
• EBITDA margin in Q4 at 33.0% was within the 32-33% sustainable guidance range
• Net cash from operating activities grew 65.6% YoY to Rs.2,738 Cr

Risk Factors

• Material costs grew 30.4% YoY in Q4, outpacing revenue growth of 9.5% by 20.9 pp, compressing margins
• EBITDA margin contracted 130 bps YoY in Q4 to 33.0%; FY26 margin at 31.9% slightly below 32-33% guidance
• Income Tax Draft Assessment of Rs.570.51 Cr relating to Transfer Pricing; no provision made, pending appeal
• Asset turnover declined to 0.53x (from 0.55x in FY25), as asset base grew faster than revenue
• Free cash flow was thin at Rs.218 Cr due to heavy capex of Rs.2,520 Cr