Sharekhan's research report on Zydus Wellness
The company is raising ~Rs. 1,100 crore through QIP/preferential allotment to promoter, which will be utilised to reduce debt. Reduction in debt would lead to cost savings of Rs. 90-100 crore, which would result in strong EPS accretion in FY2022-23. It has identified three pillars of growth from a medium to long-term perspective: driving synergistic benefits from Heinz deal, new launches and expanding international footprint. The three pillars strategy could help company to achieve earnings CAGR of 27% over FY2020-23 (with OPM expanding by 180 bps).
We re-iterate a Buy rating on Zydus Wellness (ZWL) with a revised price target of Rs. 2,300. Negative working capital, focus on strengthening balance sheet and strong earnings visibility makes ZWL a best pick in mid-cap FMCG space.
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