Zydus Lifesciences: Company expects single-digit growth in US business in FY26

 EBITDA was muted YoY as 6% YoY sales growth (2% QoQ growth in US sales, +8% YoY in India) was offset by lower Gross margin (GM)  (-167 bps YoY) and higher costs (staff/R&D +14%/+24% YoY). The company expects single-digit growth in the US business in FY26 (USD 1.3 bn in FY25), led by steady traction in gMyrbetriq; volume growth, and new launches (25-30).

While the company has visibility on new launches (25-30 p.a.; including complex generics and exclusivity launches), traction in base business, and scale-up in its specialty business (505-(b)(2)) in FY25, it refrains from giving guidance for FY27. It remains optimistic about the scale-up of the specialty business (gaining traction in all three brands of Sitagliptin 505(b)(2) in the US) and the progress of key assets (CUTX101, Saroglitozar, Usnoflast), which are expected to monetize over the next 1-3 years.

The company has completed 85.6% stake acquisition in Amplitude Surgical (foray into medical device segment) and looking for smooth integration as well as focusing on expanding presence in key markets like Australia, India, and LatAm; also there is focus on improving overall profitability.

Factoring Amplitude acquisition, we have raised EPS by 1%/5% for FY26/27E. We retain ADD with a revised Target Price  (TP) of INR 1,010 (23x Q1FY28E), as the broader thesis of steady growth (in the US and India) and the monetization of R&D assets (injectables, biosimilars, and NCEs) remain intact. However, estimated decline in EBITDA margin to ~26%+ in FY26 and 24-24.5% in FY27/28 (from 29.8% in FY25) is a key concern.

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 Source : HDFC Securities Institutional Equities

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