Zydus Wellness Q1 FY27 earnings call

Zydus Wellness reported a strong Q1 FY27, with consolidated net sales growing by 66.7% year-on-year to INR 1,429.9 crores. This growth was underpinned by resilient consumer demand, a shift towards higher-value products, and significant contributions from quick commerce and e-commerce channels. EBITDA for the quarter increased by 55.3% to INR 241.7 crores, with an overall EBITDA percentage expanding by approximately 0.4% on a like-to-like basis, reflecting effective management of costs and product mix.

The domestic business achieved a growth of 4.6%, primarily driven by strong performances in Skin and Hair Care, which grew by 34.5%, and Food & Nutrition, which expanded by 16%. The international business, including the Comfort Click segment, delivered a robust like-to-like growth of 24.8%. Organized channels, including modern trade (17%) and digital commerce (21%), accounted for an industry-leading 38% of saliency, with digital channels sustaining strong double-digit growth and gaining market share.

The seasonal portfolio, comprising brands like Nycil and Glucon-D, experienced a 12% decline during the quarter. This was largely attributed to unseasonal summer showers in key Eastern and Northern markets, which disrupted typical consumption patterns and softened demand for weather-sensitive products. While Glucon-D saw flat growth due to weakness in the East, Nycil's performance was also impacted by cautious channel stocking and higher retailer inventory, though management noted signs of recovery towards the quarter-end.

Zydus Wellness continued to leverage its R&D capabilities to expand its portfolio with targeted innovations. New launches included Complan Power Play milkshake, extending the Complan franchise into ready-to-drink nutrition, and VieMax Diabetes Care, a scientifically formulated solution for diabetes management. The Comfort Click business also expanded its international footprint by launching the WeightWorld D2C platform in the U.S. and entering the Walmart marketplace, alongside accelerating Middle East growth.

Gross margin expanded in the core business, further supported by the significantly higher margins of the Comfort Click business. Input cost trends remained largely manageable despite commodity and currency fluctuations. On the finance front, the company transitioned from GBP to Euro loans, resulting in a reduction in interest costs. The effective tax rate for Q1 FY27 was approximately 27% due to specific disallowances, but management anticipates it to normalize to around 25% for FY27 and FY28, with an increasing cash component.

Complan surpassed its previous quarter's growth despite category degrowth, driven by a consistent approach focusing on core kid segments, specialized nutrition spaces (NutriGro, VieMax), and new RTD offerings. Everyuth delivered strong double-digit growth, with its tan removal franchise outperforming expectations and improving its facial cleansing category ranking from fifth to fourth. RiteBite Max Protein continued its strong growth trajectory, growing at more than double its historical rate, fueled by brand building, distribution expansion, and portfolio enhancement.