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Informist, Tuesday, Feb. 4, 2025

By Sunil Raghu

AHMEDABAD - Zydus Lifesciences Ltd.'s consolidated net profit for the December quarter is seen rising 16.9% from a year ago to INR 9.2 billion, led by growth in the US as well as India formulations business, according to the average of the estimates of 10 brokerage firms.

Sequentially, the bottom line is seen rising 1.3% from INR 9.1 billion in Jul-Sept. The estimates of net profit by the brokerages range from INR 8.4 billion by KR Choksey Research to INR 10.2 billion by Nirmal Bang Equities Pvt Ltd.

The drugmaker's net sales are expected to rise 16.2% on year to INR 52.3 billion, according to the average of the estimates. Sequentially, the net sales are seen falling marginally by 0.1%. The estimates range from INR 50 billion by JM Financial Institutional Securities Pvt Ltd. to INR 54.2 billion by PhillipCapital (India) Pvt Ltd.

Motilal Oswal expects the company's domestic formulations sales to grow 11.5% on year due to growth in cardiac, anti-infective and antineoplastic, supported by in-licensing deals. KR Choksey expects the revenue to increase 15.7% on year and 0.5% on quarter, driven by the company's focus on chronic and specialty therapies, and high-value product launches in key markets.

Most brokerage firms expect the company's US revenue to rise on year in Oct-Dec. They expect gRevlimid, used to treat myelomea, to begin contributing to the company's bottom line. Revlimid was expected to be the key new product for the company in the US. However, in Jul-Sept, it was yet to contribute according to expectations. Nirmal Bang sees Zydus Life's revenue growing 14% on year, with the US business expected to grow 12%, as contribution from gRevlimid resumes, amid market growth in domestic business at 15% on year. Motilal Oswal expects Zydus Life to benefit from niche products such as gRevlimid, g-Spiriva and g-mirabegron. It also expects the pharma major's US sales to grow 30.8% on year due to the ramp-up of niche launches.

Zydus Lifesciences is scheduled to announce its Oct-Dec earnings on Wednesday.

Earnings before interest, tax, depreciation, and amortisation of the company are seen at INR 13.9 billion, in the range of INR 13.0 billion to INR 15.2 billion, according to nine brokerages.

Nirmal Bang sees the EBITDA margin improving by 400 basis points on year to 28% due to softening of raw material prices, and expects the net profit margin to expand 300 basis points to 20% on a lower tax outgo. KR Choksey, on its part, sees Zydus Life's EBITDA margin expanding by 136 basis points on year, but dropping 121 basis points on quarter to 25.8%. It expects the adjusted net profit margin to contract by 85 basis points on year and 33 basis points on quarter to 16.2%.

Analysts said they were looking for an update on the progress in scaling up the Liqmeds business, which Zydus Life had acquired for nearly INR 7 billion in October 2023. Other than Liqmeds, analysts are also tracking development of the new chemical entities pipeline and of some products in the US market.

At 1222 IST, shares of the company were up 0.7% at 969.40 rupees on the National Stock Exchange. At the current price, the stock is up more than 2% from its levels at the end of the session on Nov. 12, the day its September quarter earnings were announced.

Nirmal Bang, which estimates the highest growth in net profit, has given a hold call for the stock, with a target of INR 1,089 per share. KR Choksey, which has the lowest estimate for the net profit, has a buy call with a target of INR 1,201 per share, an upside of 24.9% from the current price of INR 261 per share. Motilal Oswal, which is neutral on the stock, sees the stock price at around INR 974 per share.

Following are the Oct-Dec consolidated earnings estimates for Zydus Lifesciences based on reports from 10 brokerage firms in descending order by estimate of net profit:

End

US$1 = INR 87.06 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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