Skip to main content

Stock Review: Zydus Wellness

Being Debt-Free Will Support Company's Acquisition Plan

 

THE stock of Zydus Wellness has more than doubled in the past nine months and is currently trading at a price-earning multiple of 43. Several operational as well as external reasons support the current valuations and still make the stock attractive.


   Zydus Wellness, a 73% subsidiary of Cadila Healthcare, operates in niche health and skincare segments. Among other products, its portfolio includes low calorie sugar and low cholesterol alternative for butter. According to the information provided by the company in its presentation, all these categories are growing at a compounded annual growth rate (CAGR) of more than 25%.


   The healthy growth rate can be attributed to the company's strategy to focus in aggressive advertising and promotion of its products. As such, its ad spends relative to sales are much higher at over 20%. The company's repertoire of brands includes Sugar Free, Nutralite butter alternative and Eve-rYuth skin care solutions.


In the first half of FY11, the company has maintained its high growth rate. Its net sales increased by 30%, operating income by 35% and net profits by 56%, when compared with the year-ago levels.


Zydus currently commands 80% market share in the low calorie sugar segment. To leverage its market lead further, it is expanding the market by introducing low calorie beverage products.


   The company's Sikkim unit, which is in the tax-free zone, is expected to commission from the first half of 2011. This is expected to reduce its tax burden from the current level of over 35% to around 25%, which would support net margin.


   Since it caters to niche markets with low competition, Zydus enjoys pricing power, which is a shield against increasing raw material prices. However, a concern is that the company has to improve its presence across the country by expanding to more number of retail shops. According to a report by Anand Rathi Research, the company's products are sold by over half a million retail stores in the country, much lower than its bigger peers.


   It reported cash and equivalents of . 98 crore as on September 31, 2010. In the past, the company had adopted the inorganic strategy to grow by acquiring Nutralite. The management has indicated that it would look for more acquisitions in the future. Given its cash position of . 98 crore as on September 2010, and the fact that it is debt free, the company has re-sources to fulfil its inorganic growth targets.

 

Popular posts from this blog

Bear markets may kill, but bulls always return with vengeance

Average Gain Between Any Two Downturns Has Been 186% IF you have lost a fortune in shares by now, the best way to make it up perhaps could be by buying some more. Since the Great Depression of 1929, the world has undergone 12 major bear market phases. The average bear market has lasted about 22 months, and the market has fallen by an average of 51%. However, the average gain during the bull market between any two downturns has been an eye-popping 186%. The index here in question is the S&P 500. Bull markets — after every recessionary phase — have always been good for investors. All major bull rallies since end-1930 have resulted in markets gaining between 50-500%. Historic numbers show that the magnitude (size or breadth) of a bull market is much heavier than that of a bear market. The million dollar question is: Are we at the threshold of another bull market rally? Markets could go up intermittently, but convincing rallies will take time to happen. The current bear phase is...

NRIs and direct taxes code (DTC)

DTC Proposes To Do Away With Special Provision That Allows NRIs Liberalised Duration Of Stay In Country      THE new direct taxes code could bring a large number of global Indians under the tax net, as it does away with a provision that allowed individuals to escape tax in any country citing double tax avoidance.    The new legislation, introduced in Parliament on Monday, says an individual shall be a resident of India in any financial year if he is in the country for more than 59 days in that year, and has been has been India for more 365 days in four preceding financial years. A number of Indian industrialists including Vedanta's Anil Agarwal and Essar's Ravi Ruia have acquired non-resident status over the years.    The DTC has only attempted to clean up the provision in line with the laws globally. A phrase "being outside India" in the existing income tax law exempted individuals who stay outside the country for six months from paying taxes. This was prone ...

Stick to Good Fund Manager who Can Multiply Your Investment

A manager may be the difference between the best and worst funds. Here's how you can find the right one    Does a mutual fund manager make a difference to your investment? The answer may not be as easy as you think, since most best-performing mutual funds have moved away from individualistic fund management to process-driven methods, limiting the scope of an individual's role in investment decisions. In fact, many fund managers would speak at length about how the "system" their fund house has in place makes their task of picking stocks easy even though it restricts their freedom. Still, the question is important, especially after recent reports that the Securities and Exchange Board of India ( Sebi ) may ask fund managers to disclose to investors their track record of managing money. Let us take a look at the universe of large-cap funds over the past five years. According to Value Research, an independent mutual fund tracking firm, the topper in the category is DSP...

Tata Fixed Income Portfolio Fund dividend

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)       Tata Mutual Fund has announced dividend under the dividend option of Tata Fixed Income Portfolio Scheme B2 Plan A-DQ, Tata Fixed Income Portfolio Scheme B2 Reg-DQ and Tata Fixed Income Portfolio Scheme B2 Direct-DQ. The record date has been fixed as August 29, 2013. Happy Investing!! We can help. Call 0 94 8300 8300 (India) Leave your comment with mail ID and we will answer them OR You can write back to us at PrajnaCapital [at] Gmail [dot] Com --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C. Invest Tax Saving Mutual Funds Onlin...

IDFC Classic Equity Fund

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   IDFC Classic Equity Fund IDFC Classic Equity is a large-cap equity fund which currently has assets under management worth Rs. 158.52 crore. It was launched in August 2005. The fund is benchmarked against the BSE-200 Index. Performance YTD 1-Year 3-Year 5-Year Since Inception IDFC Classic Equity 0.93 26.61 6.30 1.01 11.65 BSE 200 1.52 17.31 6.00 1.99 12.98 All figures in % as on January 31, 2013; Returns above one-year in CAGR terms ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now