Zota Health Care Shares Rated New 'Buy' At Nirmal Bang — Check Target Price, Potential Upside And More

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Nirmal Bang Report

Nirmal Bang has initiated coverage on Zota Health Care Ltd. with a Buy rating and a target price of Rs 1,936, implying an upside of 22% from the current market price of Rs 1,589.

The brokerage highlights Zota’s aggressive expansion strategy through its flagship generic pharmacy chain Davaindia, positioning the company as a key beneficiary of India’s affordability-driven healthcare shift.

Valuation:

Revenue is projected to clock ~77% CAGR over FY25–28E, led by Davaindia (~100% CAGR on account of massive store expansion), with Ebitda turning positive by FY27 as operating leverage improves and store-level profitability strengthens.

A planned Rs 4 billion QIP likely in H1 FY27 to support the aggressive rollout (~800 stores/year from FY26-28E).

Return ratios are expected to remain negative through FY27E given the long breakeven cycle and would potentially cross into the positive territory by FY28E as ~50% of the network crosses breakeven, driving ROE/ROCE to 5.3%/6.5%.

Key risks include execution challenges in adding ~1,400 stores over FY25–26, potential breakeven delays (15–18 months per outlet), intensifying competition from PMBJP(Pradhan Mantri Bharatiya Janaushadhi Prayojana) and private peers (Medkart, Dawa Dost, Netmeds), and regulatory risks on pricing/margins.

Supply chain dependence on WHO-GMP partners and imported APIs also remains a sensitivity.

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