Q3FY21 Result Update - Zydus Wellness - ICICI Direct

Zydus wellness (ZWL) posted strong Q3FY21 results with 15.6% growth in net sales led by double digit growth in Sugarfree & healthy growth across segments (except Nutralite). With the increased health awareness, Sugarfree has been witnessing strong growth in the last three quarters. The company is trying to leverage this trend by introducing newer variants and is also aggressively spending towards brand building through digital campaigns. Further, it maintained its leadership position in Glucon D, EverYuth Scrub & Nycil with market share of 58.3%, 34.8% & 35.7%, respectively. Gross margins expanded 262 bps on account of significant decline in milk prices. The continuous exercise of cost cutting measures resulted in overhead savings of 362 bps & integration of acquired business results in lower employee cost 113 bps. The company aggressively increased its marketing spends by 560 bps towards media & digital campaigns. Despite high advertisement spend, operating profit increased 32.7% to Rs. 49.5 crore & operating margins expanded 176 bps to 13%. The company pre-paid Rs. 1500 crore non-convertible debenture (NCD) which resulted in one-time expense of Rs. 132.1 crore, of which Rs. 34.2 was incurred in Q3. Adjusting for one-time expense, PAT grew from Rs. 8.9 crore to Rs. 35.9 crore.

Valuation & Outlook

The company has benefited from strong growth in Sugarfree, Complan, Glucon-D & Nycil mainly led by tailwinds from heightened health awareness, aggressive new launches & improving direct reach. We believe ZWL would be able to grow its brands by leveraging chemist channel & doctor's advisory. We value the stock 35x FY23 earnings and maintain our BUY recommendation with a revised target price of Rs. 2500/share (earlier Rs. 2300).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ZydusWellness_Q3FY21.pdf

Shares of ZYDUS WELLNESS LTD. was last trading in BSE at Rs.1913.5 as compared to the previous close of Rs. 1949.3. The total number of shares traded during the day was 1226 in over 394 trades.

The stock hit an intraday high of Rs. 1976.3 and intraday low of 1905.5. The net turnover during the day was Rs. 2369477.

Source : Equity Bulls

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