Zydus Wellness: Attractive Return on Equity – Zero debt

Rajeev Thakkar presented his in-depth investment thesis on Zydus Wellness (India: ZYWL) at Asian Investing Summit 2017.

Zydus Wellness is a company with a ~USD 500 million market cap in the consumer packaged foods / personal care industry. It operates in four product categories: (i) alternative sweeteners (having a branded product range across aspartame (Sugarfree Gold), sucralose (Sugarfree Natura) and stevia (test marketing); (ii) table spread (Nutralite); (iii) health drinks (Actilife); and (iv) skin creams, face packs, and scrubs (Everyuth Naturals). Founders and managers own ~55% of the company. The product categories are nascent and the company is either a dominant or leading player in most of the segments in which it operates in (94% market share in sweeteners, 91% in peel off masks, and 30% in scrubs). The company has no debt and return on capital in excess of 20%. Given the low base of consumption in the product categories, combined with high advertising and promotional spend and the nascent stage of the market, there should be operating leverage possibilities down the line. The stock trades at a trailing P/E of 31x.

About the instructor:

Rajeev Thakkar possesses over 15 years of experience in various segments of the Capital Markets such as investment banking, corporate finance, securities broking and managing clients’ investments in equities. His tenure at PPFAS began in 2001. Rajeev’s academic inclination is evident in the plethora of degrees earned by him. He is a Chartered Accountant, Cost Accountant, CFA Charterholder and a CFP Certificant. He likes reading, playing chess and listening to music in his spare time.

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