Investment Rating - The industry rating is optimistic, expecting overall returns to exceed the CSI 300 index by more than 5% in the next six months [6]. Core Insights - Divi's Laboratories reported a significant profit growth in Q4, with total revenue reaching 26.71 billion INR, a year-on-year increase of 12.13%, and net profit of 6.62 billion INR, up 23.61% [2][3]. - The API business has shown a notable recovery, with revenue from generic drugs increasing by approximately 13%, marking the end of eight consecutive quarters of decline [3]. - The company anticipates double-digit revenue growth for the fiscal year 2026, driven by continuous capacity expansion and the commercialization of GLP-1 contracts [3]. Summary by Sections Financial Performance - In Q4, the company achieved a total revenue of 26.71 billion INR, compared to 23.82 billion INR in the same period last year, reflecting a 12.13% growth [2]. - The pre-tax profit (PBT) was 8.64 billion INR, up from 7.31 billion INR, representing an 18.19% increase [2]. - The gross margin for Q4 was 62.1%, an increase of 1.2 percentage points year-on-year, while the net margin improved to 24.8%, up 2.2 percentage points [2]. Business Segments - The revenue from the contract manufacturing and development organization (CMO/CDMO) segment was approximately 13.6 billion INR, achieving double-digit growth and accounting for about 51% of total revenue [3]. - The company is enhancing its capabilities in peptides and is expected to commercialize GLP-related contracts by late fiscal year 2026 or early 2027 [3]. Future Outlook - The company projects double-digit revenue growth for fiscal year 2026, with the custom business expected to maintain this growth trajectory [3]. - The API segment is also anticipated to achieve double-digit growth, supported by the launch of new products and capital expenditures in Kakinada to expand capacity [3].

Core Viewpoint - Citigroup expresses increased confidence in the recovery trend of Nongfu Spring's drinking water business by 2025, anticipating a return to double-digit sales growth after a year of slowdown, which should restore investor confidence in the company's long-term performance, particularly in the drinking water segment [1][2]. Group 1: Sales and Market Performance - Nongfu Spring's management expects to achieve double-digit growth in overall group sales by 2025, despite a slight downward adjustment in net profit consensus forecasts for 2025 due to lower-than-expected revenue in the second half of 2024 [2]. - The company's market share in the drinking water segment has been recovering since June of the previous year, with strong sales performance in January and February of this year, indicating a clearer recovery path for its drinking water products [1][4]. - The company has maintained healthy channel inventory levels for its drinking water products since the end of Q3 2024, which lays a solid foundation for a significant recovery in 2025 [3]. Group 2: Profitability and Cost Management - Citigroup does not expect a significant year-on-year decline in net profit margin for 2025, projecting that the margin will remain stable due to several positive factors, including improved capacity utilization in the drinking water business and reduced rebate intensity for pure water products [2]. - The management plans to cut expenses related to pure water products in 2025, focusing instead on enhancing the natural water segment, which includes new packaging designs and additional water sources introduced in December 2024 [4]. Group 3: Strategic Adjustments - Following a decline in market share from March to May of the previous year due to negative publicity, Nongfu Spring's management has actively increased rebates to distributors to reduce channel inventory, which has contributed to the recovery of market share since June [4]. - The company intends to retain only one SKU of pure water (550ml) and is not planning to significantly expand its pure water product line, indicating a strategic shift towards natural water products [4].