Established in 1988, Zydus Wellness is a prominent consumer wellness company with a rich Indian heritage and a global presence. Their overarching vision is to promote wellness in people’s lives by adopting a holistic approach to health and well-being. With a focus on nourishing, nurturing, and energizing individuals, they offer a wide range of innovative and industry-leading products.
Boasting over 30 years of operational excellence, Zydus Wellness possesses a portfolio of seven leading brands, including Complan, Sugar Free, Glucon-D, Everyuth, Nycil, Sugarlite, and Nutralite. The company is headquartered in Ahmedabad and Mumbai, operating five manufacturing facilities across four locations: Aligarh, Sitarganj, Ahmedabad, and Sikkim. Additionally, Zydus Wellness has eight co-packing facilities situated in India, Oman, and New Zealand.
In the fourth quarter of FY23, Zydus Wellness Ltd. experienced significant revenue growth of 71.6% compared to the previous quarter and 11.4% compared to the same period last year, reaching Rs. 713.0 crores. This growth was driven by improved consumer sentiment, leading to increased sales volume. However, the company faced challenges on the operational front, including higher input costs in the milk category, wage hikes, and third-party manufacturing expenses.
As a result, the EBITDA (earnings before interest, taxes, depreciation, and amortization) declined to Rs. 141.5 crores in Q4FY23 compared to Rs. 144.6 crores in Q4FY22. The EBITDA margin also contracted by 183 basis points to 22.1% in the quarter. Despite these challenges, the company’s profit after tax (PAT) increased by 9.0% YoY to Rs. 145.3 crores in Q4FY23, with a PAT margin of 20.4% compared to 20.8% in Q4FY22. The board of directors has recommended a final dividend of Rs. 5 per share.
Valuation and Outlook
Zydus Wellness Ltd. achieved a solid 11.4% YoY revenue growth in Q4FY23. Their distribution reach improved, and they gained market share in their top five categories. However, their profit margin declined due to increased input costs, wage hikes, and manufacturing expenses. Despite this, the company’s Glucon-D and Nycil brands are expected to have strong volume growth, while caution is advised for the performance of the Complan brand. The company plans to raise prices and control input costs, which should help improve margins in the future.
Key Concall Highlights
- Q4FY23 revenue grew by 11.4% YoY, driven by 4.2% volume growth.
- Other expenses increased by 36% due to inflation, wage hikes, and Glucon-D manufacturing costs, with half being one-time expenses.
- Consolidated capex for FY23 was Rs. 48.9 crores.
- Long-term growth expected from international business, while FY23 growth was affected by supply issues in New Zealand and economic issues in Nigeria.
- Minimal impact on sugar-free business despite WHO’s announcement on low-calorie claims.
- New products contributed to 3.5% of sales.
- Everyuth brand expects double-digit growth, driven by peel-off, scrubs, and new facial cleansing launch.
- Zydus plans price hikes to regain FY21 gross margins.
- FY24 Ads & Promotion spends estimated to be around 12.5%.
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