In addition to a strong June quarter performance, 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, which is at a premium to its five-year historical average.
The company’s financial performance continues to be aided by robust growth across key markets.
The overall revenue growth of 21 per cent year-on-year (Y-o-Y) was above estimates on the back of a domestic formulation growth of over 19.5 per cent. Indian operations outperformed the market by 300-500 basis points (bps) and was supported by broad-based growth across chronic, acute and superspecialty therapies.
The share of the higher margin chronic portfolio has now grown to 54 per cent trailing 12 months revenue and is up 360 bps over the last four years. This is helping boost a stronger and more profitable product mix.
Innovation-led products such as Saroglitazar (high cholesterol) and Desidustat (anemia) 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 the overall pharma sector growth.
Commenting on the outlook, Niharika Agarwal of Nirmal Bang Research believes that Zydus will sustain healthy growth, with revenue rising from ₹27,150 crore in FY26 to ₹33,480 crore in FY28, implying 11 per cent annual growth.
India formulations should remain the key growth engine, supported by continued chronic outperformance, innovative brands, biosimilars, and vaccine. International markets and consumer wellness provide additional growth diversification, says the brokerage.
While the brokerage is constructive on the outlook, it has a ‘hold’ rating as near-term earnings remain impacted by higher investment intensity, including Saroglitazar, while US based-business erosion remains a key monitorable.
The current valuation largely captures the medium-term growth potential, says the brokerage. Its rating comes with a target price of ₹1,274.
The US formulations saw a growth of 5 per cent on a sequential basis and this was driven by base business volume expansion, launches (11 products), and the Nufymco (for retinal/eye disease) biosimilar debut, coupled with the Assertio acquisition (acquired in May this year) strengthening specialty capability.
The international markets, too, have performed well posting a 34 per cent gain Y-o-Y, led by emerging markets, a European turnaround and healthy traction in new geographies.
While the consumer wellness segment was up 67 per cent given the Comfort Click acquisition, MedTech revenues were down on a sequential basis.
In this business, the company has made investments in orthopedics, cardiology, and nephrology capability-building.
Another positive is the regulatory compliance with injectable facilities (such as Zydus Biotech Park) getting a green light from the US FDA.
The company, according to PL Research, has managed the transition well and the sales decline of generic version of cancer drug Revlimid has been offset by new niche launches.
Further, Param Desai and Kushal Shah of the brokerage point out that the company is working on a robust pipeline of complex products, including injectables, 505(b)2, transdermals, NCE, biosimilars and vaccines.
These are expected to be launched over the next 2–3 years. It expects US sales to grow at 5 per cent annually over FY26-28 despite sales erosion in some of key products.
It has guided for 2-3 high value launches over FY27-28 and a timely launch will be key to sustaining momentum in US sales. The brokerage has maintained an accumulate rating with a target price of ₹1,200.
 "Zydus Lifesciences, Zydus")