Hold Zydus Wellness target of Rs 1610: Sharekhan

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Sharekhan's research report on Zydus Wellness

Post the acquisition of Heinz portfolio, Q1 and Q4 are the best quarters for Zydus Wellness (ZWL) due to higher sales of Glucon D and Nycil during these quarters; seasonality is spread in the ratio of 70:30 between Q1/Q4 and Q2/Q3 of any fiscal for Heinz portfolio. After consolidation of Heinz portfolio, revenue growth was muted at 3.6% on like-to-like basis due to lower sales of by-products such as ghee and trading of milk; excluding by-products, revenue grew by ~9% led by steady performance of some key brands. Profitability was affected due to a change in revenue mix (lesser contribution from high margin products) and higher input prices (including milk).

Outlook

We have reduced our earnings estimates for FY2020 and FY2021 to factor in seasonality in business and maintain our Hold rating with a revised PT of Rs. 1,610.

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