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

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...

Mutual Funds: Past Performance is not just everything

Many a times your agent / distributor / relationship manager tries to push you some mutual fund schemes by enticing you with a typical sales pitch…"Sir, this scheme has generated 20% returns in the past one year." And this sales pitch often gets louder when the market conditions have been favourable. Some of the agents / distributors / relationship managers have another unique way of luring you. They say, "Sir / madam this scheme has been awarded the best scheme award in the past by a leading business channel"... And hearing all these sales talks you investors very often get attracted and sign a cheque in favour of the respective scheme.   But please ask yourself do you hear these sales talks when the capital markets turn turbulent? Why is it so that your agent / distributor / relationship manager avoids talking to you during turbulent times of the capital markets and doesn't boast about returns generated by the respective funds or awards being conferred on t...

TDS Rate and Personal Account Number(PAN)

    The TDS rate doubles to 20% from 10% if you fail to mention your Personal Account Number   IF you run a glance through your pay slip, you will come across something called TDS, which is tax deduction at source. In most cases, the employer deducts this amount at the time of payment of salary itself and pays the total tax amount to the government on behalf of all the employees. If you are a self- employed or practicing professional s, you have to pay this amount yourself.    Tax deducted at source is one of the modes of income tax collection by the government. Under the income-tax laws, income tax at specified rates is required to be deducted while making certain payments.    The rate of deduction of tax at source on interest and rent payment is 10%. For salary payments, the employers deduct income tax at source on a monthly basis after computing income tax liability on estimated annual taxable income of the employee. Tax benefits on housing loan, investments, etc are consid...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
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