Hold Zydus Lifesciences: target of Rs 1000: ICICI Securities

ICICI Securities's research report on Zydus Lifesciences

Zydus Lifesciences’ (Zydus) Q3FY25 revenue was in line with our expectations, but lower sales of gRevlimid and gAsacol led to a miss in earnings. Higher sales of Mirabegron and new launches led to a surge in US revenue (+29% YoY). We expect gRevlimid and Mirabegron to account for ~14% of FY25E revenue and ~38% of EBITDA. Launch of sitagliptin 505b(2) may boost growth in near term, gRevlimid sales could flatten out in FY26 and additional competition may enter in Mirabegron which puts its FY26-27E earnings growth at risk. Management anticipates single-digit growth in the US in FY26 while material launches from US pipeline are expected only in H2FY27. Management maintains FY25 guidance of mid-teen revenue growth and EBITDA margin of 28-29%. We raise EBITDA by ~12% for FY25E and ~4% for FY26E to factor in better US sales. Retain HOLD with a higher TP of INR 1,000, based on 22x FY26E earnings.

Outlook

We increase EBITDA by ~12% for FY25E and ~4% for FY26E to factor in better sales in the US. It trades at valuations of 21.7x FY26E and 22.9x FY27E earnings, and EV/EBITDA of 14.0x FY26E and 13.9x FY27E. Maintain HOLD with higher target price of INR 1,000 (INR 960), based on 22x FY26E EPS (unchanged).