Add Zydus Lifesciences Ltd for the Target Rs.1,120 by Choice Institutional Equities
Investments & Portfolio Build-up to Shape FY27 Earnings Profile
Revenue growth is expected to sustain at high teens in FY27E, driven by India and international markets. New launches including Semaglutide, Desidustat and Tishtha are also expected to support growth. The company has additionally announced the acquisition of Assertio, a US-based specialty and oncologyfocussed company; however, we have not factored in its impact into ZYDUSLIF’s revenue and PAT estimate in the near-term, given its less than 5% revenue contribution. EBITDA margin is projected to contract to ~24% in FY27E due to higher R&D spend, Assertio-related operating cost and increased competition in Mirabegron. Accordingly, we revise FY27/28E estimate downwards by 13.0%/1.7% and continue to value the stock at 18x FY28E EPS. Our TP is revised to INR 1,120 with an ‘ADD’ rating
Strong Overall Performance with EBITDA Margin Expansion
* Revenue grew 16.2% YoY / 10.5% QoQ to INR 75,870 Mn (vs. CIE estimate: INR 73,369 Mn).
* EBITDA grew 20.2% YoY / 40.6% QoQ to INR 25,544 Mn; margin expanded 111 bps YoY / 721 bps QoQ to 33.7% (vs. CIE estimate: 23.2%).
* Reported PAT increased 8.7% YoY / 22.1% QoQ to INR 12,725 Mn.
High-teens FY27 Growth Expected Despite Margin Normalisation
ZYDUSLIF delivered a healthy growth in FY26, supported by new launches, market expansion and inorganic initiatives. The management expects highteens growth in FY27E, which we believe will be driven by:
* India (Formulations + Consumer Health): Continued IPM outperformance led by a strategic shift towards chronic therapies, scale-up of launches such as Semaglutide and biosimilars, along with growth in the Comfort Click and VMS portfolio.
* North America: The management expects growth to moderate to high single-digits in FY27E as the company continues portfolio investments for future launches. Growth is expected to remain largely volume-driven.
* International Markets: Momentum is expected to continue with expansion into newer markets alongside sustained growth in Europe and EMs. Desidustat approval in China should further support growth.
While revenue momentum is anticipated to sustain, the management forecasts EBITDA margin to moderate to ~24% post the high base in FY26, coupled with increased cost from the Assertio acquisition and rising competition in Mirabegron.
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SEBI Registration no.: INZ 000160131
