Nomura has maintained its 'Buy' rating on Zydus Lifesciences and raised its target price to Rs 1,450 from Rs 1,140, citing growth opportunities across India, international markets outside the US and a niche US pipeline.
In its October 23 report, titled "Building optionality without breaking stride", the brokerage said the company's investments in new businesses and higher operating expenses were aimed at diversifying into "relatively more sticky and higher-value segments". It added that a strong base business was helping absorb the impact of higher investments on profitability and the balance sheet.
Zydus invested Rs 136 billion in capital expenditure and acquisitions over FY24-26, 4.5 times the level recorded in FY21-23. The company concluded seven deals, five of them outside India, and entered new segments including MedTech, Biologics CDMO, global direct-to-consumer consumer brands and US specialty brands.
Operating spending has also increased, with quarterly research and development expenditure now twice the level of three years ago. Other expenses, excluding R&D, have risen as the company incurs overheads for its new initiatives.
Nomura described the strategy as "calibrated and deliberate", aimed at diversifying into higher-value segments. It said the impact of increased investment and spending was being cushioned by the strong base business, with India and international markets outside the US growing at a healthy double-digit rate.