Sharekhan Raises Pharma Stock's Price Target, Foresees Margin Expansion: Buy For Gain

Brokerage firm is bullish on large cap pharmaceuticals sector stock, Zydus Lifesciences Ltd and raised the price target to Rs 563 apiece from the previous Rs 440 apiece.

According to the analyst, "Strong volume growth in the recently launched key products and new products to be launched in the US in Q3FY2023E should lead to equally strong growth in the US market for the upcoming quarters." If you buy Zydus Lifesciences now, you will get 28% return. Check key details below:

1. Zydus Lifesciences Stock Performance & Return

The last trading price of the stock is Rs 441 apiece with an intraday fall of 1.52%. The stock's 52-week high is Rs 458 apiece and 52-week low is Rs 319 apiece, respectively. The company has a market capitalisation of Rs 44,663.51 crore.

The stock has surged 2% in last week, 8% in last 1-month, 6% in last 3-months, and declined 1% in last 1-year, and given return of 72% in last 3-years.

2. US Outlook Strong With Market Share Gains In Key Products

Some of the company's key products such as gAsacol HD (marginal decline q-o-q), gLacosamide injection, and gAlimta (Pemetrexed Disodium) have seen strong volume expansion in Q3FY2023E on a sequential basis. The company has also launched the blockbuster drug, gRevlimid, in Q2FY2023.

Strong volume growth in recently launched key products and new products to be launched in Q3FY23E should lead to equally strong growth in the US market going ahead.

3. Indian Market Growing Strong With Market Share Gains

The company has been gaining market share in key therapies such as cardiovascular, gynecology, respiratory, and gastrointestinal in the IPM.

4. Valuation

According to Sharekhan, "The company is experiencing a strong ramp-up in its key products' share in the US and India, which is enhancing its adjusted EBITDA margin, as it indicates a healthy product mix. We introduce FY2025E estimates and roll forward our valuation to FY2025. We apply a PE of 20.0x on its FY2025 EPS and arrive at a price target (PT) of Rs. 563, indicating an upside of 26%. Thus, we maintain our Buy rating on the company."

Key Risks: 1) Price erosion in the US generics business could hurt performance. 2) Any delay in resolution of USFDA issues at Moraiya plant. 3) Forex volatility could affect earnings.

5. About Zydus Lifesciences

Zydus Lifescience is one of the leading pharmaceutical companies in India. The company is present across the pharmaceutical value chain of research, development, manufacturing, marketing, and selling of finished dosage human formulations (generics, branded generics, and specialty formulations, including biosimilars and vaccines), active pharmaceutical ingredients (APIs), animal healthcare products, and consumer wellness products.

 

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. 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 taking any investment decision.