Sharekhan is bullish on Zydus Wellness has recommended buy rating on the stock with a target price of Rs 1472 in its research report dated December 07, 2018.
Sharekhan's research report on Zydus Wellness
Zydus Wellness (Zydus) decides to raise Rs. 4,075 crore through a mix of equity and debt in the ratio of 1.7:1. Preferential allotment of 1.86 crore shares at Rs. 1,382 per share will result in equity dilution of ~5%. The money is raised to fund the acquisition of Heinz India business for ~Rs. 4,600 crore. Fund raising through a mix of debt and equity would result in earnings dilution of 3% and 6% for FY2019E and FY2020E, respectively, which is much lesser than earlier anticipated by us. We expect FY2021 will be operationally much better at the consolidated level.
Outlook
With receding risk of high earnings dilution and acquired brands making Zydus a commendable player in the health and wellness space, we upgrade our rating on the stock from Hold to Buy with a revised PT of Rs. 1,472. The stock has corrected by about10% since the announcement of acquisition and, hence, downside risk is minimal.
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