Buy Zydus Wellness : Good Long term pick

Rotating image of Optical Coherence Tomography...

Image via Wikipedia

BSE CODE : 531335

Market Cap   734.95cr  * EPS (TTM) 8.70 * P/E  21.6

Strong brands in fast-growing niche segments: Zydus Wellness owns strong brands Nutralite (34% of turnover), Sugar Free (39% of turnover) and EverYuth (26% of turnover) that have literal dominance in their fast growing categories. While Nutralite has a market share of 75% in the margarine (a low-cholesterol butter substitute) market, its sales have doubled in the past three years, in line with the trend in the category. Similarly, both Sugar Free, with an 82% market share in the low-calorie sugar substitute space, and EverYuth, with its stronghold in the facial peel off, scrub and face wash categories of speciality skin care products, have grown at a CAGR of 25% over the same period.

At an inflexion point: Given the proliferation of the lifestyle diseases, mainly those related to heart and diabetes, and the increasing awareness regarding health and fitness, Zydus Wellness? product basket has the potential to sustain a high growth in the medium to long term.

Healthy return ratios and free cash flows: Zydus Wellness is a debt-free company with free cash of Rs72 crore on its books. It runs the business on advance collection terms from distributors and customers. This implies minimal working capital blockage and zero bad debt risk. Given the strong internal accruals, the company will not require any equity or debt financing to sustain its organic growth and will be able to pay good dividends on a recurring basis. Like most of the sound FMCG companies, Zydus Wellness has strong return ratios with its RoE and RoCE exceeding 40% and 60% respectively.

Attractive valuations: The stock is trading at 20.4x its FY2010E earnings and 15.7x its FY2011E earnings and appears attractively priced at these valuations, considering the company’s sound business proposition, strong financials and the prospect of sustainable high growth over the next few years.

With inputs from Sharekhan

Reblog this post [with Zemanta]

0 comments:

Post a Comment

All comments are moderated. Please post no spam

Disclaimer & Privacy Policies

(c) Mrs. Ruby Christy. This site and contents are owned by Mrs. Ruby Christy;
Use of this website and/or services offered by us indicates your acceptance of our Disclaimer& Privacy Policies.

Information and opinions provided on this website (www.investchips.com) has been independently obtained from sources believed to be reliable. However, such information may include inaccuracies, errors or omissions. Investchips.com and its affiliates, information providers or content providers and R.John Christy and his Family shall have no liability to you or third parties for the accuracy, completeness, timeliness or correct sequencing of information available on this website or feeds, or for any decision made or action taken by you in reliance upon such information, or for the delay or interruption of such information. Investchips.com,its affiliates, information providers ,content providers and R. John Christy and his Family shall have no liability for investment decisions or other actions taken or made by you based on the information provided on this website. Any action you choose to take in the markets is totally your own responsibility. Investchips.com and R. John Christy and his Family will not be liable for any, direct or indirect, consequential or incidental damages or loss arising out of the use of this information. This information is neither an offer to sell nor solicitation to buy any of the securities mentioned herein. Opinions expressed by R. John Christy are his own and not of his past, present and future employers.
The DoubleClick DART cookie is used by Google in the ads served on this websites displaying AdSense for content ads. When users visit this website and either view or click on an ad, a cookie may be dropped on that end user's browser.
  • Google, as a third party vendor, uses cookies to serve ads on this site.
  • Google's use of the DART cookie enables it to serve ads to your users based on their visit to this site and other sites on the Internet.
  • Users may opt out of the use of the DART cookie by visiting the Google ad and content network privacy policy.
  • www.investchips.com never collects any personal information of visitors.