Zydus Lifesci. (ZYDUSLIFE)

FairStock Score: 71/100 — STEADY

Score breakdown: P/E: 2/3 · ROCE: 1/2 · Growth: 1/2 · Dividend: 0/1

Key Financials

Strengths

• High ROE of 20.62% and ROCE of 24.31% indicate efficient capital use and a strong business model
• Promoter holding of 75% aligns management interests with minority shareholders
• Debt-to-equity of only 0.38 and Piotroski F-Score of 8/9 suggest a financially healthy balance sheet
• Latest quarter shows robust sales of ₹6,865 Cr and net profit of ₹1,023 Cr

Concerns

• Negative free cash flow of ₹1,600 Cr despite reported profitability is a red flag for earnings quality
• Stock trades at ₹946.35, well above the Graham Number of ₹511.25, leaving a negative margin of safety of about 80%
• Profit growth of 8.85% lags sales growth of 17.27%, indicating margin compression
• PEG ratio of 1.78 suggests the valuation is not cheap relative to growth

AI Analysis

When I look at Zydus Lifesci, I see a well-run pharmaceutical business with many of the qualities I admire. The return on equity is 20.62%, and ROCE is 24.31% — these are strong numbers that suggest management knows how to deploy capital. The balance sheet is sensible too, with debt-to-equity of only 0.38, and a Piotroski F-Score of 8 out of 9 adds to my confidence in the financial health. Promoters holding 75% means their interests are aligned with mine as a minority shareholder. But valuation is where my enthusiasm cools. At ₹946.35, the stock trades at 18.16 times earnings and 3.98 times book value. Graham's discipline teaches me to pay a fair price for a good business, not an excessive one. The Graham Number here is ₹511.25, which implies a negative margin of safety of over 80%. That is far too rich for my taste. I am also worried that free cash flow is negative at ₹1,600 Cr despite reported profits. Sales grew 17.27%, yet profit growth was only 8.85% — margins are not keeping pace. The five-year revenue CAGR of 9.01% is respectable, not spectacular. With a PEG ratio of 1.78, the market is pricing in more growth than the recent numbers justify. This is a solid, steady pharmaceutical company, but at this price, it fails my value test. I would rather wait for a more reasonable entry point. Quality matters, but price is the margin of safety, and today there is none.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer