Zydus Wellness Ltd. share price target

Zydus Wellness Limited’s (ZWL’s) Q3FY25 numbers were mixed with revenue beating estimates and growing by 14.6% y-o-y to Rs. 462 crore (versus expectation of Rs. 435 crore), while OPM stood flat y-o-y at 3.1% and missed expectations of 5.8%. Volume growth stood at 4.8%.

Q3FY25 sales came in 2% above consensus while EBITDA was 2% lower due to 15bps lower-than-expected margins

Zydus Wellness Limited’s (ZWL’s) Q2FY2025 numbers were mixed with revenue growing by 12% y-o-y to Rs. 493 crore (versus Rs. 475 crore expected), while OPM stood flat y-o-y at 4% (against expectation of 5.3%). Adjusted PAT came in at Rs. 16 crore.

We maintain a Buy on Zydus Wellness Limited (ZWL) with an unchanged PT of Rs. 3,000. Stock has run up by 32% since our upgrade to Buy on May 14, 2024.

Sales (+20%) were 7% higher on heatwave but EBITDA was in line with Bloomberg consensus. We forecast +13% sales growth in FY25

AMBER: Persistent near-term challenges; cut to SELL. CPI and IIP: Still some pain points on inflation. Credit Composition: Study on personal loans. HMCL: Healthy quarter but positives priced in. TMX: Improving order outlook; maintain HOLD. BANDHAN: Recovery on track. IGL: Legacy UP, new GAs can offset slowdown, reiterate BUY. ZYWL: Seasonally weak quarter

Flattish volume growth in Q2 owing to muted performance in glucose and sweetener categories

Zydus witnessed a decent performance with double-digit revenue growth (~5% volume growth), excluding the impact of unseasonal rains (~1% YoY reported revenue growth) on Glucon D brand which has higher salience in Q1. Nycil, Nutralite and Everyuth exhibited a good performance, while Complan witnessed good consumer offtakes.

Q4 revenue grew 11.4% YoY on the back of continuous price hikes; volume growth muted at 4%

Zydus reported a decent revenue growth of ~11% YoY with volume growth of ~4% YoY. Gross margin was flat YoY at 51% in Q4 despite significant dairy inflation (still below FY21 levels). Price hike of 7.8% has been implemented to recover gross margins further (better mix and moderation in dairy inflation are other drivers).

Zydus reported a decent (though below potential) top-line. Flat volume growth despite ~7% price hike and higher distribution expansion benefit (faster than peers), has been underwhelming.

Zydus reported a decent (though below potential) top-line and volume growth prints of 12% and 5%, respectively. Gross margins were down 490bps YoY due to sharp inflation in milk prices and weak product mix.

Q2 revenue grew 12% YoY (-38% QoQ) to Rs 4.3bn aided by 5% volume growth

Revenue growth steady; inflation bites into margins