Zydus Wellness Ltd Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Positive

Achieves strong revenue growth and expands market presence

In Q3FY25, Zydus Wellness Ltd. reported revenue of Rs. 4,619 million, growing 14.6% YoY but down 6.3% QoQ due to slower urban demand caused by inflation. Despite this, growth was seen across categories—food and beverages grew 8.8% YoY, while personal care surged 50.3% YoY. The company maintained a 49.0% gross margin, supported by smart pricing, a good product mix, and hedging strategies. Nycil remained the market leader with a 33.9% share, Everyuth performed well, capturing 47.3% of the facial scrub market, and Glucon-D grew 21.3% with a 58.9% market share. Sugar-Free continued to dominate with a 95.4% market share. EBITDA rose 16.5% to Rs. 148 million, with an EBITDA margin of 3.2%, while net profit stood at Rs. 64 million. During the quarter, Zydus Wellness completed the acquisition of Naturell (India) Pvt. Ltd., which sells nutrition bars, cookies, and chips under the Ritebite Max Protein brand. The company continues to grow through new product launches, acquisitions, and innovation, strengthening its market position.

Key Concall Highlights

Moderate FMCG Growth: Some categories are growing steadily despite a slow market. Rural demand is improving, but urban demand remains weak.
Short-Term Demand Dip: The company expects demand to recover post-Budget 2025, boosting consumer sentiment and spending.
Stable Gross Margin: Despite inflation, margins have remained steady due to:
- Hedging strategies
- Better product mix
- Smart pricing adjustments
- Supply chain improvements
- Digital marketing investments
Naturell India Acquisition: The company acquired 100% of Naturell India Pvt. Ltd. and added its financial results for one month.
- New products launched include Blueberry Blast and Protein Bar Bytes under the Naturell brand.
Market Leadership: Zydus leads in key brands:
- Everyuth: 47.3% market share
- Nycil: 33.9% market share
- Glucon-D: 58.9% market share
- Sugar-Free: 95.4% market share (top player in sugar substitutes)
- Strong online presence, outperforming in e-commerce sales.
Growth Strategy:
- Expanding brands through digital marketing & e-commerce
- Increasing consumer engagement
Long-Term Outlook:
- Management targets 17-18% margin in the long run
- Focus on higher gross margins and operational efficiency
- Aims for double-digit revenue growth through innovation and adapting to consumer needs.

Valuation and Outlook

Zydus Wellness operates in the consumer wellness sector with two main segments—Food & Nutrition and Personal Care—focusing on health and wellness products. The company has strong growth potential, with five out of six major brands leading in their categories. In the last quarter, revenue grew 14.6%, and gross margins remained stable despite weak demand. Smaller SKUs are growing faster, and the company expects double-digit revenue growth in FY26, helped by a wider product range, strong marketing, and higher consumer spending post-Budget. Management is working on improving profit margins, aiming for 17-18% EBITDA margins in the next 6-8 quarters through better pricing, cost savings, and operational efficiency. With a strong focus on profitability and growth, Zydus Wellness looks well-positioned for future success.