Buy Zydus Wellness; target of Rs 3000: Sharekhan

Sharekhan's research report on Zydus Wellness

Subdued demand, seasonal vagaries, and category-specific issues led to muted revenue growth in FY2024. However, ZWL maintained its leadership position in most categories it operates in. Strong summers led to a stellar performance in Q1FY2025. Cash flow generation stayed strong, with FCF at Rs. 218 crore (FCF/EBIDTA of 71%); Return ratios have bottomed out at ~5% and are expected to see improvement going ahead. We expect ZWL to deliver a revenue/PAT CAGR of 14%/34%, respectively over FY2024-FY2026E driven by distribution expansion, innovation, effective media and promotion and cost efficiencies.

Outlook

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 and currently trades at 37x/29x its FY2025E/FY2026E EPS, respectively.

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