Zydus Wellness Reports 68% Growth In Its Net

Zydus Wellness announced its first quarter results today i.e. on 7th August,2013. Its parent Cadila Healthcare also announced first quarter results on the same time.

Zydus Wellness, is prominantly known for its brand Sugarfree which holds more than 90% market share in the sugar substitute market. It also has other three products i.e. Nutrallite, Everyuth and Acti Life. Revenues of the company have increased by 11% to Rs 115 crore in Q1FY14 as against Rs 103 crore in Q1FY13. Net profit of the company has rose by 68% to Rs 23 crore mainly due to the tax write back.

On year on year basis its raw material consumption has increased by about 3% to Rs 26.42 crore. This slower rise in the major input cost helped the company to report marginal rise in its EBITDA margins.The EBITDA margin of the company rose by 7 basis point to stand at 15.96% in Q1FY14 as against 15.89% in Q1FY13.

For the quarter company has wirtten back tax to the tune of Rs 3 crore which has helped the company to report robust net profit growth. If one sees its growth at the profit before tax level, then it works out to be 11% which is mostly in line with top line growth.

Shares of of the company on YTD basis have appreciated by 21%. At the CMP of Rs 608, the stock is trading at the price to earning ratio of 22x. We believe that the slowdown in the quarter would be the one off scenario and the recent fall in the stock should be used to accumulate the stock. We retain our price target of Rs 806 giving an upside of more than 30% in the next one year.