Citi sees any sharp correction in Divi's Labs shares as a strong buying opportunity

Brokerage firm Citi suggests investors to take any correction in shares of Divi's Laboratories as an opportunity to lap up the stock, given that its its drug pipeline and thereby growth prospects, remain strong. Citi also highlighted other catalysts like opportunities emerging for Divi's in contrast media and GLP-1 segments, which further strengthens its case.

This comes after shares of Divi's Labs slipped 3 percent in Monday's session amid uncertainty over the passage of the US Biosecure Act in 2024. The Biosecure Act was kept out of a key defence bill, which suggests a potential softening of the US's stance on Chinese biotech. As the defence bill was the most viable path for the act's approval in 2024, its failure this year could have a negative, albeit sentimental, impact on Indian CDMO players.

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However, analysts at Citi are not too concerned as they believes that even while the passage of the Biosecure Act appears to have been delayed, its thesis remains intact. Biopharmaceutical companies will continue to look for diversification and will keep adding additional partners and suppliers," the brokerage wrote in a note.

Clearing the air on another major setback faced by the company after Entresto, a key cancer drug produced by one of Divi's clients--Novartis, lost a US ruling in favour of a generic players. This means that soon a generic version of the drug may enter the market with the potential to adversely impact its revenue potential.

Here as well, Citi goes against the wind and believes Enresto sales may not come down against the Street's estimates of a sharp decline. The drugmaker also tried to pacify investors and had previously stated that the US ruling will not have any incremental impact on Divi's business.

On account of these, Citi has a 'buy' call on the stock, while at 09.14 am, shares of Divi's Labs were trading a percent higher at Rs 6,024 on the NSE.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.