Zydus Wellness' Operating Profit Margins Slip To 6.8% YoY

Zydus Wellness Q3FY2023 was weak with sales unchanged, while OPM (operating profit margins) fell 154 basis points year-on-year to 6.8 per cent, influenced by lower gross margins. NPAT reached Rs 20 billion (down 16 per cent yoy).

Zydus gained or maintained market share or leadership in most product categories, which remained the highlight of the quarter. The increase in market share along with the expansion of distribution channels will help the company achieve high single-digit volume growth in a stable demand environment.

The company raised prices 6.5 per cent at the end of the quarter. This, combined with an improved product mix, should help keep gross margins stable year-over-year (Q3 improvement of 57 bps QoQ). The stock has corrected 20 per cent over the past three months and is trading at 28.1x/22.6x/18.7x its 2023E/2024E/2025E earnings.