In addition to a strong June-quarter performance, new launches and a robust pipeline of complex products, recent regulatory compliance and chronic therapy-led sales in the domestic market are positives for the drug major.
At the current price of ₹1,145, the stock is trading at 25 times its FY28 earnings estimates, a premium to its five-year historical average.
The company’s financial performance continues to be aided by robust growth across key markets. Overall revenue growth of 21 per cent year-on-year (Y-o-Y) was above estimates, driven by domestic formulation growth of over 19.5 per cent.
Indian operations outperformed the market by 300-500 basis points and were supported by broad-based growth across chronic, acute and super-speciality therapies.
The share of the higher-margin chronic portfolio has now grown to 54 per cent of trailing 12-month revenue, up 360 basis points over the past four years. This is helping the company build a stronger and more profitable product mix.
Innovation-led products such as Saroglitazar, used for high cholesterol, and Desidustat, used for anaemia, posted 30-45 per cent growth, while biologics gained traction across a few brands.
While the company is gaining market share, the contribution of Semaglutide has remained low.
The company expects the India business to post mid-teens growth and outperform overall pharmaceutical sector growth.
Niharika Agarwal of Nirmal Bang Research believes Zydus will sustain healthy growth, with revenue rising from ₹27,150 crore in FY26 to ₹33,480 crore in FY28, implying annual growth of 11 per cent.
India formulations should remain the key growth engine, supported by continued chronic outperformance, innovative brands, biosimilars and vaccines, while international markets and consumer wellness provide additional diversification, according to the brokerage.
While Nirmal Bang is constructive on the outlook, it has a ‘hold’ rating as near-term earnings remain affected by higher investment intensity, including on Saroglitazar, while erosion in the US base business remains a key monitorable.
The current valuation largely captures the medium-term growth potential, according to the brokerage. Its rating comes with a target price of ₹1,274.
The US formulations business posted sequential growth of 5 per cent, driven by base-business volume expansion, 11 new launches and the debut of Nufymco, a biosimilar for retinal and eye diseases.
The Assertio acquisition, completed in May this year, has also strengthened Zydus’ speciality capabilities.
International markets performed strongly, posting 34 per cent Y-o-Y growth, led by emerging markets, a turnaround in Europe and healthy traction in new geographies.
The consumer wellness segment grew 67 per cent following the Comfort Click acquisition, while MedTech revenue declined sequentially.
In MedTech, the company has invested in building capabilities across orthopaedics, cardiology and nephrology.
Another positive is regulatory compliance, with injectable facilities such as Zydus Biotech Park receiving a green signal from the US Food and Drug Administration (FDA).
Complex-product pipeline key to US growth
According to PL Research, the company has managed the transition well, with the decline in sales of the generic version of cancer drug Revlimid being offset by new niche launches.
Param Desai and Kushal Shah of the brokerage said the company is working on a robust pipeline of complex products, including injectables, 505(b)(2) products, transdermals, new chemical entities (NCEs), biosimilars and vaccines.
These are expected to be launched over the next two-three years.
The brokerage expects US sales to grow at 5 per cent annually over FY26-28 despite sales erosion in some key products.
Zydus has guided for two-three high-value launches over FY27 and FY28, and timely launches will be key to sustaining momentum in US sales.
PL Research has maintained an ‘accumulate’ rating on the stock with a target price of ₹1,200.
