Buy This 5th Largest Branded Pharma Stock For Target Price Of Rs 445: KR Choksey

KR Choksey in its recently published September 2022 report on Zydus Lifesciences Ltd. has given a buy call to the stock of the company for a target price of Rs 445/share. Considering this, it has the potential to gain 19% in 12 months if stocks are purchased at the Current Market Price. Sun TV Network Limited is a large-cap Pharmaceuticals Sector company having a Market Capitalization of Rs 38,421.06 crore.

Zydus Lifesciences Ltd. is the 5th largest branded Pharma company in India with a 3.9% Indian Pharma Market (IPM) share as of May 22. The company was founded in 1950 by Ramanbhai B. Patel. It provides formulations, generics, biologics and vaccines across global markets including, the US.

 Stock outlook

The Current Market Price (CMP) of stock is Rs 376.10 apiece. At the time of writing, shares trading 0.15% down from its previous close. The stock's 52 week low is Rs 319 apiece and 52 week high is Rs 573.2- apiece, respectively.

Returns of Investment

In the past 1 week, the stock gave a positive return of 1.27%. Whereas, in the past 1 and 3 months, it gave a mix returns with 2.77% negative in 1 month and 6.94% positive in 3 months, respectively. Over the past 1 year, the stock gave a negative return of 32.29% and in the past 3 years a positive return of 32.29%. In the past 5 years, the stock gave a negative return of 21.86%.

Strong growth in revenue to resume in India due to market share gains

• The company gained market share and improved its ranking in core therapies such as cardiovascular, gynecology, respiratory, and pain management, on a YoY basis, in India during Q1FY23, as per AWACS, Apr - June 22 quarter report.

• In India, the company intends to grow in line with the market in the near term, however, in the medium-long term, the company envisions outgrowing the IPM growth by expanding its presence in chronic therapies, introducing new molecules and specialty therapies, and expanding its presence in the institutional segment, with the help of novel drugs and high-value biosimilars.

 

Strong show in the US after six quarters of lackluster performance

• The company was able to neutralize price erosion in the US market entirely with its volume share gain in the base portfolio and new product launches in Q1FY23.
• The company filed 8 ANDAs and received approval for 7 new products (including a tentative approval) in Q1FY23. The 3 of the ANDA filings are designated as Competitive Generic Therapies (CGT).

US Outlook strengthens while India will start performing in line with IPM growth

Strong growth in the US segment with volume share gain in the base business, new product launches, and a strong pipeline of complex products expected to be launched in FY23 and ahead, in the US; likely improvement in India business sales due to waning of base effect; and keen focus on achieving EBITDA margins of around 20.0% in FY23, are key positives. Zydus Lifesciences' shares have fallen 5.0% since our last update in Aug 22.

The brokerage recommends buy for a Target price of Rs 445 apiece

KR Choksey Said, "We estimate a 7.2% and a 2.2% CAGR growth in revenue and adjusted net income, respectively over FY22-FY24E. The shares are trading at 18.0x/15.7x on FY23E/FY24E EPS estimates, respectively. We apply a PE multiple of 18.9x to FY24E EPS of INR 23.5 and arrive at the Target Price of INR 445.0, which gives an upside potential of 19.8% from its CMP of INR 372. Accordingly, we recommend "BUY" on the shares of Zydus Lifesciences Ltd."

Disclaimer

The stock has been picked from the brokerage report of KR Choksey. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.