Accumulate Zydus Lifesciences Ltd For Target Rs.1,200 by Prabhudas Liladhar Capital Ltd
Strong revenue growth across India and EM markets
Zydus Lifesciences (ZYDUSLIF) Q1 EBITDA was largely in line with our estimates aided by higher revenues across key markets. The company has managed transition well of gRevlimid sales decline with new niche launches. Further company is working on a robust pipeline of complex products, including injectables, 505(b)2, transdermals, NCE, biosimilars and vaccines, they are expected to materialize over the next 2–3 years. We expect US sales to growth at 5% CAGR over FY26-28E despite sales erosion in some of key products. Mgmt have guided for 2-3 high value launches over FY27E/28E, timely launch will be key to sustaining momentum in US sales. Our FY27/28E EPS broadly remain unchanged. We maintain our ‘Accumulate’ rating with TP of INR 1,200, valuing at 25x FY28E EPS.
Higher revenues YoY:
ZYDUSLIF showed revenue growth of 21% YoY to INR 78bn, 6% above our estimate. The YoY growth was aided by higher domestic formulation. It delivered growth of ~20% YoY. Consumer business grew by 67% YoY given comfort click business consolidation. US sales came in at USD 327mn up 1.5% QoQ. We est USD 320mn. EM markets were up by 34% YoY to INR 9.7bn. API revenues were up 15% YoY. Medtech business reported revenues of INR 2.8bn; down QoQ
EBITDA in line:
EBITDA, including other operating income, came in at INR 18.7bn; down 8% YoY, in line with our estimates. OPM stood at 23.4%, down 755bps YoY. GMs were down 72bps YoY and 189bps QoQ to ~72%. R&D expenses came in higher at INR 6.4bn (8.2% of revenue), up 32.3% YoY. Other expenses ex R&D were up 50% YoY and 7% QoQ given new business consolidation. Other operating income came in higher at INR 2.2bn. There was forex gain of INR 569mn. Tax rate stood at 26.7%. Reported PAT of INR 9.4bn. EPS adj for forex at INR 9/share
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