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Anand Rathi Report
With its Q4 revenue up 10% YoY (versus the Street's 5% YoY estimate) and a 45 basis points expansion in its Ebitda margin to 20.7% (20%), Zydus Wellness Ltd. posted a healthy quarterly performance.
Its personal care range (EverYuth, Nycil) posted a good 23% YoY growth, helped by the upswing in consumption demand while food and nutrition posted 6% YoY growth, hurt by price cuts in Nutralite.
Management was optimistic of double-digit revenue growth in FY25, led by innovation, distribution and its international foray and expected margin to revert to 17-18% over the next two years, aided by operating leverage and softer input prices.
We tweak our FY25e/F26e EPS slightly to factor in the Q4 performance and a lower FY25 tax rate.
We retain our long-term view of a double-digit revenue CAGR and margins returning to 18-20% over two-four years.
We retain our Buy with a higher 12-month target price of Rs 2,150, 33 times FY26e EPS (earlier Rs 1,910).
Key risks:
Failure of product launches, unwarranted or pricey bolt-on acquisitions, price-based competition.
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