Buy Zydus Wellness: target of Rs 2300: Sharekhan

Sharekhan's research repor on Zydus Wellness

Q2FY2021 revenues grew by 5% to Rs. 342 crore but a fall in gross margins dragged down OPM by 141 bps to 7.9%. However, excluding impact of GST budgetary support (ceased for Sitarganj plant from January) revenue would have grown by 9.3%. Sugarfree and Nycil registered strong double-digit growth. Company has identified three growth pillars for the medium to long term - 1) Driving synergistic benefits from Heinz acquisition, 2) new products and 3) wider international footprint. With a three-pillar strategy, ZWL is strongly placed to achieve earnings CAGR of 27% over FY2020-23.

Outlook

We stick to our Buy rating with unchanged PT of Rs. 2,300.

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