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

Guide to pension plans in the form of Insurance

  Pension plans ensure that you are financially secure during your golden years. Take a look at the important aspects that you must keep in mind while opting for one...      Gone are the days when a leading criterion for choosing an employer was the type of pension plan that came with your salary package. Today, more important issues like matching of skill sets to job requirements, scope for personal and financial growth, etc. have come to the forefront. However, this has left individuals with the responsibility of financially planning for their golden years. And it's all for the best as there are a variety of pension plans available in the market to suit different individuals and their specific needs. WHAT ARE PENSION PLANS?     In a pension plan, you are required to pay premiums for a certain number of years and once you reach the retirement age, the insurer returns a lump sum amount that can be then used to purchase an annuity or stream of income for the rest of your life....

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

More on Mutual Funds

What Is a Mutual Fund ? A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investable surplus of as little as a few thousand rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme's stated objectives. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.   What Are The Types of Mutual Fund Scheme...

PF e-Passbook

  Provident Fund e-Passbook   The Employees Provident Fund Organisation now runs an e-passbook service that enables members to log in and access their provident fund accounts . This facility enables tracking of the money and ensuring that the employer's contribution has been deposited into the account. This facility is available to those whose accounts are with the central provident fund commissioner for maintenance and can be availed at members.epfoservices.in . Registration A member can register at the portal easily by using PAN , Aadhar or passport number as the log in and the mobile numbers as the PIN . This combination enables easy retrieval of information. Accounts After logging in, the member has to choose the state where the employer is located, and enter the code number of the employer, account number and name. These details can be obtained from any existing PF document . PIN To download the passbook, the member will request...

Refinancing Home Loans

With home loan lending rates easing out, many borrowers are considering home refinance as an option to minimise their liability    Home loan borrowers have always been concerned about their financial outflow while repaying debts. With interest rates easing out in the recent past, many borrowers are considering home refinance as an option to reduce this burden. So what is home refinance and how can you capitalise from it? Understanding refinancing.     Refinancing in simple terms means replacing your existing loan, with a new one, under fresh terms and conditions. So when you talk of home loan refinance, you will be repaying your existing home loan before its final tenure, with a new loan possessing different terms.    A home refinance option could prove to be beneficial for many borrowers. However, it is important to understand its procedure and the various costs that are associated with it before considering the option.    Whether it's for personal requirements or chang...
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