Multibagger pharma stock hits record high as analysts raise earnings estimates after Q4 results. Should you buy?

Zydus Lifesciences' share has given multibagger returns to investors, with a 115 per cent jump in the last one year and a 335 per cent gain in the last five years. Zydus Lifesciences' share price also scaled an all-time high of ₹1,172.50 on the NSE on Tuesday. While a robust Q4 performance boosted Zydus Lifesciences' share price, the strong growth guidance by the company prompted analysts to raise earnings outlook. 

Strong US growth, supported by other markets, lifted Q4 show

Zydus Lifesciences' revenue was ₹5,534 crore in Q4, up 10.4 per cent year over year. Its US operations contributed well to growth, supported by domestic business. Its earnings before interest, tax, depreciation, and amortisation (EBITDA), at ₹1,630 crore, also grew 23.7 per cent year over year. It reported a net profit of ₹1,182 crore, a multifold increase over ₹297 crore in the year-ago quarter. 

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The pharma major's US sales grew 12 per cent YoY (10.5 per cent YoY in constant currency terms), contributing slightly less than half of its overall revenues. The domestic sales (including wellness), which contributed more than 40 per cent of overall revenues, also rose 7 per cent year on year in Q4. The management has guided for double-digit growth in all markets, including domestic business, which, as per analysts, has led them to look at the stock positively. 

 Analysts up their estimates

Analysts at Motilal Oswal Financial Services have raised their earnings estimates by 12 per cent and 14 per cent for FY25 and FY26, respectively for Zydus Lifesciences after Q4 results to factor in niche launches and increased traction in commercialised limited competition products, increasing share of chronic therapies in the domestic formulation segment, and a gradual recovery in demand for consumer healthcare products. 

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Analysts at Elara Securities India Pvt Ltd observed, “More surprising than Q4 show was the exceptionally strong guidance of high-teen revenue growth for FY25". 

They were earlier projecting only high single-digit growth. The recently launched generics of Myrbetriq, used for treating overactive bladder, and incremental sales of generics of Revlimid, the multiple Myeloma treatment drug, could be helping boost the outlook, they added. 

Zydus Lifesciences is also confident of sustaining the high margin of FY24. Analysts at Elara added that if there is no competition in generic Asacol HD (for treating inflammatory bowel disease) in FY25, further upside to those numbers may be witnessed. 

However, at this stage, they have estimated only 14 per cent revenue growth for FY25, which is slightly shy of Zydus Lifesciences' growth guidance. 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions