Ahmedabad‑based Zydus Lifesciences on Wednesday reported a robust Q4 with sales and profitability beating street expectations, even as one‑off impairment charges and a sharp jump in net debt have led analysts to retain a cautious stance on the stock.
Strong operational performance
Zydus posted Q4FY26 sales of Rs 75.87 billion, up 16% year‑on‑year and 11% quarter‑on‑quarter, 5% ahead of analyst estimates of Rs 72.26 billion.
EBITDA stood at Rs 19.10 billion, 15% ahead of the estimated Rs 16.55 billion despite a 12% decline year‑on‑year, helped by favourable gross margins at 74.0% and EBITDA margin at 25.2%.
Recurring PAT came in at Rs 16.70 billion, up 20% yoy and 48% qoq, and a striking 78% above the Rs 9.39 billion estimated by Equirus Securities, reflecting underlying strength in core operations. However, reported PAT was lower at Rs 12.73 billion after impairment charges of Rs 2,196 million related to the Brazil business and Zydus Worldwide.
Domestic formulations delivered Rs 17.53 billion in sales, up 14% yoy and 3% qoq, with branded formulations growing 15% yoy, faster than the India Pharma Market (IPM).
The US business clocked US$ 323 million, up US$ 9 million qoq and US$ 19 million above the US$ 304 million estimate, supported by the launch of six ANDAs and one rare diseases drug, Zycubo, which helped offset price erosion and the negligible contribution from generic Revlimid.
Zydus Wellness reported Rs 14.63 billion in sales, up 61% yoy and 53% qoq, 5% above the Rs 14 billion estimate, while emerging markets grew 36% yoy to Rs 8.0 billion, also marginally above consensus. API sales, however, remained weak at Rs 1.22 billion, down 4.8% yoy and 34.4% qoq, and 15.2% below the Rs 1.5 billion estimate.
Cash flow, debt, and valuation
Operating cash flow for FY26 stood at Rs 21.17 billion, sharply lower than Rs 67.81 billion in FY25, while net debt ballooned to Rs 103.5 billion from Rs 2.1 billion a year earlier, highlighting elevated leverage.
At the current CMP of Rs 1,019, the stock trades at around 23x/25x FY27E/FY28E EPS based on Equirus’ forecasts, which see FY27E sales at Rs 309,465 crore and PAT at Rs 37,612 crore from Rs 41,019 crore in FY26E.
Biosimilars and semaglutide roadmap
Adding longer‑term growth context, Zydus is betting on biosimilars and high‑value generics to drive future earnings. The company has already launched a semaglutide generic on day‑one of patent expiry in India and is targeting rollout across more than 20 markets globally over the next two years via partnerships.
Sharvil Patel, MD, Zydus Lifesciences, told analysts that the company expects a “real scale‑up” of its global biosimilars business from FY29, underpinned by its manufacturing scale and a pipeline of more than 13 biosimilar and complex biologic molecules.
Analyst view and investment stance
Despite the operational beat and promising pipeline, analysts continue to rate the stock as “Underweight” (Relative) and “REDUCE” (Absolute), both under review, citing the surge in net debt, softer cash flow, and market‑related risks in the US generic space.
The positive growth in domestic branded formulations, wellness, emerging markets and biosimilars suggests structural momentum, but investors will likely stay focused on balance‑sheet repair and execution of the semaglutide and global biosimilars rollout before reassessing the risk–reward at current valuations.
