Motilal Oswal's research report on Zydus LifeSciences
Zydus Lifesciences (ZYDUSLIF) posted a beat on operational performance in 4QFY23, aided by strong traction in US and consumer healthcare sales. In the domestic formulation (DF) business, sales growth was steady (Ex-Covid basis) and better than industry growth for the quarter. We raise our earnings estimates for FY24/FY25 by 3%/4% to factor in 1) a robust launch pipeline in US generics, including limited competition products (g-Vascepa/transdermals/REMS); 2) increased competition in gTrokendi; and 3) higher R&D spending. We value ZYDUSLIF at 19x 12M forward earnings to arrive at a TP of INR550. We expect a 12% earnings CAGR over FY23-25, led by a 9%/8% sales CAGR in the US/DF segments. While the US pipeline looks interesting over next 12- 15 months, the overall improvement in return ratios is expected to remain in check. Moreover, valuation provides limited upside from current levels. Hence, we maintain Neutral on the stock.
Outlook
We expect a 12% earnings CAGR over FY23-25, led by a 9%/8% sales CAGR in the US/DF segments. While the US pipeline looks interesting over the next 12-15 months, the overall improvement in return ratios is expected to remain in check. Moreover, valuation provides limited upside from current levels. Hence, we maintain Neutral on the stock.
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