ICICI Direct is bullish on Zydus Wellness has recommended buy rating on the stock with a target price of Rs 2300 in its research report dated September 04, 2020.
ICICI Direct’s research report on Zydus Wellness
Zydus Wellness (ZWL) announced a Rs 1100 crore fund raising with Rs 350 crore infusion by promoter and Rs 750 crore by QIB placement of equity/equivalent instruments. We believe the company would utilise funds to repay high cost debt of Rs 1500 crore that was raised at the time of acquisition of the Heinz business. With equity infusion of Rs 1100 crore, existing cash of Rs 200 crore, FY21 earnings, ZWL would be able to repay almost entire debt by March 2021. This would result in saving of Rs 140 crore interest cost. Assuming equity infusion at current price of Rs 1650/share (given promoters have infused Rs 350 crore at Rs 1643/share), the equity dilution would be ~12%. The mere saving of interest cost would increase our FY22 EPS estimate by 21%.
We value the stock at 35x FY22E EPS and maintain BUY rating with a revised target price of Rs 2300.
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First Published on Sep 7, 2020 07:37 pm