Zydus Life up 3% on mixed Q3, mcap tops Rs 1 trn; analysts split on outlook

Despite challenges from a lower-margin product mix, Zydus Life benefitted from forex gains and a favourable tax rate, which led to a PAT beat, analysts said

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Pharmaceutical major Zydus Lifesciences reported a mixed performance in the December quarter of financial year 2025 (Q3FY25) results, with revenue surpassing estimates but Ebitda and margins falling short of expectations. 

 

Despite challenges from a lower-margin product mix, the company benefitted from forex gains and a favourable tax rate, which led to a PAT beat, analysts said.

 

Zydus Life reported a 17 per cent Y-o-Y increase in revenue to Rs 5,269 crore, surpassing estimates, while its profit after tax (PAT) grew 29.6 per cent Y-o-Y to Rs 1,023.5 crore. Ebitda also rose 26 per cent Y-o-Y to Rs 1,387.5 crore, and its margin expanded 180 basis points to 26.3 per cent. However, the company’s operational performance was mixed, with analysts noting that lower sales from higher-margin products, particularly in the US market, impacted margins.

 

On the bourses, Zydus Lifesciences share price rose as much as 2.65 per cent to hit an intraday high of Rs 1,004.20 per share on Thursday, February 6, 2025. The company also topped Rs 1 lakh crore-mark in market capitalisation. Last checked, the Zydus Life market capitalisation stood at Rs 1,00,391.97 crore.

 

Looking ahead, brokerages offered a varied outlook as Nuvama downgraded the stock to ‘Reduce’ on concerns about future competition, Motilal Oswal maintained a ‘Neutral’ rating, while Nomura remained optimistic, maintaining a ‘Buy’ rating with a higher target price, driven by a strong pipeline and growth prospects in both the US and India.

 

Brokerage views 

 

Analysts at Nuvama downgraded Zydus Life to ‘Reduce’ and revised its FY27E EPS down by 11 per cent. They highlighted concerns about increased competition for some key US products, which account for around 16 per cent of total revenue. 

 

Nuvama remained cautious on the company’s ability to maintain growth in FY27, although they noted that Zydus may partly offset this with the return of gRevlimid and a reduced R&D spend. The brokerage has set a target price of Rs 1,003

 

Motilal Oswal maintained a ‘Neutral’ rating with a reduced target price of Rs 1,000, indicating that while the company has seen healthy growth in the US and strong performance in its consumer wellness segment, moderate growth in the domestic formulations segment has limited overall upside. 

 

They also pointed out Zydus Life’s entry into the consumer snacking market as a potential growth avenue. However, Motilal Oswal believes the current valuation of the stock offers limited upside potential, which is why they maintain a neutral stance.

 

Nomura, on the other hand, was more optimistic, maintaining a ‘Buy’ rating and an increased target price of Rs 1,140. They highlighted the company's strong pipeline, including Sitagliptin 505(b)2 and other specialty drugs, as key drivers of growth, particularly in the US market. 

 

Nomura also expects Zydus Life to perform ahead of the broader market in India in the near-term, with the potential for a strong upswing as new products come to market. They believe the company’s specialty segment, including rare disease treatments through its subsidiary Sentynl, will also contribute positively to its growth trajectory, with a break-even expected by FY26.

 

Zydus Life’s focus on expanding its generics pipeline beyond gRevlimid, as well as efforts in biotechnology and new chemical entities (NCEs), were also noted by analysts as key factors that could support long-term growth. 

 

Despite the varied outlooks, Zydus Life Sciences’ solid fundamentals and strategic focus on expanding its product portfolio and pipeline suggest that the stock has potential in the medium to long-term. However, the risks posed by competition, especially in key US products, remain an important factor for analysts to watch in the coming quarters.