Healthcare Company's US Sales Amplifies To US$ 202mn, Buy Stock With Rs. 425 Target Price: Prabhudas Lilladher

Reputed brokerage firm Prabhudas Lilladher recommends investors to buy the stocks of Zydus Lifesciences. Its Q1FY23 sales were flat YoY, while it increased 5% QoQ, to Rs. 40.7bn. US sales came in at US$ 202mn, increased by 7% QoQ. Emerging markets growth was 14% YoY to Rs. 3.2bn. Management Reiterate its +20% margin guidance and growth in US sales for FY23. The company is more focused on India and EM market for biologics business with 9 products in pipeline at various stages of clinical trials and early stages of development.

Stock To Buy: Target Price & Financial Result

The Current Market Price (CMP) of Zydus Lifesciences is Rs. 365. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 425. This stock has the potential to give a 16.75% return, in the upcoming 1 year. This is a small-cap stock with a market capitalization of around Rs. 39,603 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 364
Target Price	Rs. 425
Potential 1 year return	16.75%
52 week high share price	Rs. 577
52 week low share price	Rs. 319.00

The company has reported healthy US sales, but a weak domestic formulation. Domestic formulation sales declined by 17% YoY. Ex-Covid, divested products and generics, branded generics portfolio growth came at 9% YoY. Consumer business grew healthy by 18% YoY. However, API saw a decline of 9% YoY to Rs. 1.2bn. Other expenses were flat YoY, while staff costs increased by 9% YoY and 14% QoQ. Reported PAT came in at Rs. 5.3bn.

Prabhudas Lilladher: Advantages Of The Stock

During Q1FY23, the company filed 8 ANDAs including 3 filings designated as Competitive Generic Therapies (CGT). Growth in the consumer wellness business was aided by Glucon-D and Nycil.

Maintaining a buy rating for the company, Prabhudas Lilladher stated, "Company's steady domestic franchise, strong balance sheet and potential new launches like gRevlimid will help to negate pricing pressure and likely competition in some key products like gAsacol in the US. Further company has initiated cost efficiency programs. It is also working on a robust pipeline of complex products including injectables, transdermals, NCE, biosimilars, and vaccines which will materialize over the next 2-3 years. Our FY23E and FY24E EPS stands cut by 8% and 5%. At CMP, the stock is trading at 17x FY24E EPS. We recommend 'Buy' with a target price of Rs. 425 (Rs. 450 earlier), based on 20x FY24E earnings. The company's GM increased by 150bp QoQ to 61.5%, Adj for a one-off in Q4-GM were down YoY and QoQ. EBITDA including other operating income came in at Rs. 8.3bn, in line with our est. R&D cost came at 7.2% of sales, up 5% YoY."

Company portfolio

Zydus Lifesciences Limited (formerly known as Cadila Healthcare), a leading Indian pharmaceutical company is a fully integrated, global healthcare provider. With in-depth domain expertise in the field of healthcare, it has strong capabilities across the spectrum of the pharmaceutical value chain. From formulations to active pharmaceutical ingredients and animal healthcare products to wellness products, Zydus has earned a reputation amongst Indian pharmaceutical companies for providing comprehensive and complete healthcare solutions, the company informs. Its volume share gain in base business and contribution from new product launches has neutralized the impact of price erosion and aided QoQ growth in the US biz.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.