Zydus Wellness Ltd Research ReportQ3FY21

Zydus wellness (ZWL) posted strong Q3FY21 results with 15.6% growth in net sales led by double digit growth in Sugarfree & healthy growth across segments (except Nutralite). With the increased health awareness, Sugarfree has been witnessing strong growth in the last three quarters. The company is trying to leverage this trend by introducing newer variants and is also aggressively spending towards brand building through digital campaigns. Further, it maintained its leadership position in Glucon D, EverYuth Scrub & Nycil with market share of 58.3%, 34.8% & 35.7%, respectively. Gross margins expanded 262 bps on account of significant decline in milk prices. The continuous exercise of cost cutting measures resulted in overhead savings of 362 bps & integration of acquired business results in lower employee cost 113 bps. The company aggressively increased its marketing spends by 560 bps towards media & digital campaigns. Despite high advertisement spend, operating profit increased 32.7% to | 49.5 crore & operating margins expanded 176 bps to 13%. The company pre-paid | 1500 crore non-convertible debenture (NCD) which resulted in one-time expense of | 132.1 crore, of which | 34.2 was incurred in Q3. Adjusting for one-time expense, PAT grew from | 8.9 crore to | 35.9 crore.