Here's why Zydus Wellness shares jumped 9% on Monday to top the Nifty 500 gainers list

Shares of Zydus Wellness Ltd. gained over 9% on Monday, September 7, after brokerage firm IIFL Capital initiated coverage on it. The stock is also the top gainer on the Nifty 500 index.

IIFL Capital has initiated coverage with a "buy" rating and a target price of ₹650 per share on the stock, which implies an upside potential of 23% from last Friday's closing levels.

The brokerage said Zydus Wellness has historically been a portfolio of niche franchises such as Sugar Free, Glucon-D, Nycil, Everyuth, Nutralite, with dominant market shares that have been held back by seasonality and maturity in category growth.

It said the acquisitions of RiteBike Max Protein and Comfort Click (CC) change that mix decisively, taking the combined salience of the top acquired platforms to 50% by FY27 and thereby lifting the projected comparable sales to grow at a Compounded Annual Growth Rate (CAGR) of 13.7% over financial year 2026-2029, compared to 6.4% over financial year 2021-2026.



Also, consolidated EBITDA margin should expand from 12.9% in FY26 to 16% in FY29, driving comparable adjusted earnings per share (EPS) to grow at a 23% CAGR over the same period, which is the among the highest in IIFL's FMCG coverage.

The brokerage said that unlike the Heinz acquisition, where the bet was on reviving mature brands, the acquisitions of RiteBite Max Protein and CC are bets that the already-compounding platforms keep compounding.

Zydus Wellness, in return, brings general trade (GT) distribution muscle to RiteBite and a stronger balance sheet for CC, buying scale and funding to expand beyond the UK / Europe geographies, the IIFL note said.

The brokerage said CC is strongly gross-margin accretive but with 85% of its cost base variable, the consolidated margin expansion will be driven largely by the base business, led by premiumisation-driven gross margin expansion and operating leverage.

IIFL Capital said Zydus Wellness, at present, is a structurally different company, with the two acquired growth engines reducing its sensitivity to seasonal and mature categories.

At 27 times and 29 times its adjusted EPS for financial year 2027 and 2028 respectively, Zydus Wellness' adjusted EPS CAGR, IIFL finds the company's current valuations attractive, as the change in growth and margin expansion that follows it, is still unpriced by the street.

Shares of Zydus Wellness are trading 6.2% higher on Monday at ₹564.5. The stock has risen 5.7% in the last one month and is now up 22% so far this year.

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