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ICICI Securities Report
Zydus Lifesciences Ltd.'s Q1 results saw dual benefit of surge in India (+15% YoY) and U.S. (+24.5%). Gross/Ebitda margins touched new highs of 74.4%/33.9%. Growth in India consumer biz (+20.6%) is lumpy and was driven by seasonality.
India formulation biz though may grow in-line with market. Share of gRevlimid and Mirabegron has likely surged to 38–40% (27–30% in Q4 FY24) of U..S sales boosting growth.
Sales run-rate in Mirabegron is unlikely to sustain beyond Q2 FY25 and risk of additional competition in base portfolio is rising. Management has maintained its revenue growth guidance, expects a 100-150 bps YoY increase in Ebitda margins in FY25.
We raise our earnings per share for FY25–26E by 1–2%. We downgrade Zydus to Reduce on expensive valuation (27 times FY26E EPS) and raise our target price to Rs 1,120 based on 23 times FY26E earnings.
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