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Informist, Saturday, May 16, 2026

By Eshitva Prakash

MUMBAI – A continued downturn in its US business, owing to negligible generic Revlimid sales is likely to lead to a sharp decline in the bottom line of Zydus Lifesciences Ltd. in the March quarter. While recent acquisitions and strong sales in branded formulations may help the company claw its way into a positive top-line growth, margins may be under pressure as supply and transport costs jump amid the war in Iran, analysts tracking the company said.

Brokerages are not accounting for shelf-stock adjustments in their estimates, which may lead to an even bigger hit on the company's bottom line. Pharmaceutical companies pay a shelf stock adjustment cost to distributors to protect them from a fall in on-hand inventory prices, which, in this case is for the inventory of generic Revlimid.

Zydus Lifesciences is expected to report a consolidated net profit of INR 9.70 billion for the March quarter, down more than 30% on year and down almost 14% from the previous quarter, according to the average of estimates from nine brokerages. This fall in the profit growth was the most in last 13 quarters.

The sequential decline in net profit is likely to be similar to the December quarter, when the company had reported a 17% fall in net profit, owing to negligible sales of generic Revlimid. In the reporting quarter, Zydus Lifesciences will draw zero revenue from sales of the cancer drug, some brokerages said.

Prabhudas Lilladher Pvt. Ltd. has the highest estimate for net profit at INR 14.65 billion, while Nuvama Wealth Management Ltd. has the lowest view at INR 8.22 billion, indicating a whopping 41% drop on year.

The company's revenue is seen at INR 68.96 billion, up nearly 6% on year and almost flat sequentially, according to the average of estimates. A 6% on-year rise will mark the slowest sales growth for the company in nine quarters. Revenue estimates range from a high of INR 72.26 billion from Equirus Securities Pvt. Ltd. to a low of INR 64.20 billion from ICICI Securities Ltd.

This sharp drop in sales takes into account a high base effect of US sales in the year-ago quarter. Nuvama expects the company's US formulation sales to drop to $293 million from $363 million in the corresponding quarter a year ago.

The company's revenue will likely be supported by strong sales in India branded formulations and contribution from recent acquisitions, brokerages said. Nuvama and Motilal Oswal Financial Services Ltd. expect domestic formulation sales to grow around 15% on year, primarily because of high sales in chronic therapies such as cardiac and respiratory therapies, sharp sales growth in Europe, and traction in generic Semaglutide sales.

A pick-up in generic Myrbetriq sales and branded drugs will also help the company's top line grow in the March quarter, Equirus Securities said. In contrast, Systematix Shares and Stocks (India) Ltd. said the company will face higher costs due to royalty-related payments for the drug.

Apart from a decline in generic Revlimid sales, which was a margin accretive drug, the company's profitability woes are also driven by high supply and freight costs due to the effective closure of the Strait of Hormuz. "Due to the ongoing US-Iran war, freight cost has increased considerably in the second half of March, which may have some impact on profitability," Motilal Oswal said. The brokerage expects a 3.5% on year increase in revenue drawn from the rupee's depreciation.

The company's earnings before interest, tax, depreciation, and amortisation are expected to slump 21.6% on year to INR 16.67 billion, according to an average of eight estimates. The absence of Revlimid sales in generic segment is the prominent factor for this bleak view among brokerages.

However, the company's EBITDA margin will likely expand unlike its peers facing the fall in Revlimid sales. This is largely because of the better margin business of its subsidiaries Medtech and the consolidation of Comfort Click, which the company acquired in August.

Investors will closely monitor the company's efforts to scale-up Comfort Click. They will also look for cues on sustainability of international business growth, new launches, US generic launch pipeline, and updates on Saroglitazar sales, brokerages said. The company will report its earnings on Tuesday.

Of the 12 brokerage reports on the company available with Informist, seven have a "buy" or equivalent recommendation on the stock with an average target price of INR 1,158. This is over 24% higher than the current market price. Three brokerages have a "hold" recommendation and two say "sell".

Friday, shares of Zydus Lifesciences closed over 2% higher at INR 1,011.70 on the National Stock Exchange. Since the company reported its December quarter earnings, its stock has risen over 9%.

Following are the March quarter earnings estimates, in INR billion, for Zydus Lifesciences from 11 brokerages in descending order of the net profit estimate:

End

US$1 = INR 95.97

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

Edited by Akul Nishant Akhoury

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