UBS has maintained a ‘Sell’ rating on Zydus Life, setting a target price of ₹850, indicating a downside potential from the current market price of ₹901.50 (as of March 11). The brokerage expressed concerns over the company’s €390 million acquisition of Amplitude Surgical, citing its high valuation and low return on capital employed (RoCE).
According to UBS, the acquisition is expensive, with an EV/EBITDA multiple of 14.5x based on the last 12 months’ earnings. Additionally, the first few years post-acquisition are expected to generate a low RoCE of 3-4%, potentially impacting overall profitability. UBS also noted that Zydus Life has used its existing cash reserves for the acquisition, which could affect liquidity in the near term.
On Monday, Zydus Life’s share price rose 0.87% to ₹901.50, despite the cautious outlook from UBS. Investors will be closely watching how the acquisition plays out in the company’s financial performance over the coming quarters.
Disclaimer: The above stock recommendations are based on brokerage reports and do not constitute financial advice. Investors are advised to conduct their own research before making investment decisions.
