Zenith Healthcare Limited

Healthcare — Drug Manufacturers - Specialty & Generic · BSE

₹3.09−₹0.02 (−0.64%)

DalalBaazaar Score

33 / 100

🔴 Weak

Verdict

CAUTION

Risk

High

Driven by negative free cash flow, micro-cap size, which brings thin liquidity, a very high earnings multiple, which leaves little margin for disappointment.

In simple words: The business is earning a fairly low return on the money invested in it, though profits are falling even as sales grow. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:09 pm

Caution warranted. Multiple fundamental metrics — flagged in red below — point to either valuation stretch, leverage risk, or weakening profitability. This doesn't mean avoid the stock outright, but it does mean the burden of proof is on the growth story to justify the current price.

Understanding the Business

Company site ↗

The 60-second version of Zenith Healthcare Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Zenith Healthcare Limited engages in the manufacturing and trading of pharmaceutical products in India and internationally. The company offers its products in the form of tablets, capsules, and liquids.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Employees42

Annual revenue₹10 Cr

How does it make money?

Turns over ₹10 Cr a year. Of every ₹100 of sales, about ₹0 reaches shareholders as profit, with ₹3 left at the operating level before interest, tax and depreciation. Each of its 42 employees supports ₹24.8 lakh of revenue a year, the signature of a people-led business.

EBITDA margin3.1%

Net margin0.0%

Revenue / employee₹24.8 lakh

Who are its competitors?

The closest listed comparisons in its industry are SUN PHARMACEUTICAL IND L, DR. REDDY S LABORATORIES, CIPLA LTD, DIVI S LABORATORIES LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

SUN PHARMACEUTICAL IND LP/E 34.9x · ROE 14.5%

DR. REDDY S LABORATORIESP/E 31.0x · ROE 8.8%

CIPLA LTDP/E 31.8x · ROE 9.8%

DIVI S LABORATORIES LTDP/E 83.0x · ROE 17.5%

What is its competitive advantage?Little sign of one

Returns on capital of -2.8% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

ROCE-2.8%

ROE0.1%

Peer median ROE14.5%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved -21% while net margin moved -92% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect-21%

Margin effect-92%

DalalBaazaar Score

33/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ Revenue has contracted at 7.4% a year
✗ Profit has declined at 59.7% a year
✗ Profit fell 92.4% in the latest year

Quality vs. Valuation

Company Quality

28/ 100

Weak

How good the business is, ignoring the share price entirely.

Valuation

45/ 100

Fair

What you are being asked to pay, ignoring how good the business is.

Weak on business quality and not cheap enough to compensate.

Historical Valuation

Current P/E

103.0x

3Y Median

279.3x

40 monthly readings · mean 318.5x · range 106.4x–1063.3x

Sector Median

33.3x

median of 4 sector peers

🟢Current valuation is approximately 63% below its 3y median of 279.3x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

⚠️Against its sector it trades 209% above the peer median of 33.3x.

vs. its own history

Cheap

279.3x median over 40 months · -63%

vs. sector peers

Expensive

33.3x median of 4 peers · +209%

vs. generic bands

Expensive

Above 35x

P/E (Trailing)

103.0x

P/B

2.24x

EV/EBITDA

50.4x

PEG

—

Dividend Yield

None

What's Good / What's Bad

🟢 What's Going Well2

Valuation below its historical average
At 103.0x the stock trades 63% below its own median of 279.3x.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Free cash flow is negative
The business is not currently covering its capital spending from operations.
Return on capital is falling
ROCE has declined from 1.6% to -2.8% — often a sign of competition or overexpansion.

Red Flags

4 items require attention · 1 high · 3 watch

🔴Thin interest coverageFinancial
Operating profit covers interest only -23.9x — little room if earnings dip.
🟡Interest coverage is deterioratingFinancial
Cover has fallen from 19.2x to -23.9x.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹1 Cr in the latest year.
🟡Profit is decliningFinancial
Net profit is down 93% over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Priced below its own history
The stock trades 63% below its own median multiple. If the business performs as it has and simply re-rates back to normal, that gap is return on its own.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

A premium to the sector to defend
It trades 209% above the peer median. That premium needs a reason that persists, or it closes.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1EBITDA margin holds above 1%✓ 3.1%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Free cash flow remains positive✗ -₹1 Cr
Profit that never becomes cash eventually stops being profit.
3Interest cover stays above 3x✗ -23.9x
How much operating profit can fall before interest stops being comfortably covered.
4ROCE stays above 8%✗ -2.8%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.
5Valuation vs its own median of 279.3x✓ 103.0x today
A re-rating above its own history needs a reason; without one it is just a higher price.

Investment Checklist

4 / 10 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✗ Profit growing year-over-year
✗ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Short-term technical trend isn't bearish

Price history

Quick Metrics

1 good · 5 neutral · 5 weak

Market Cap

₹17 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

103.0x

Expensive

Expensive — verify against sector peers

P/B Ratio

2.24x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹0.03

Profitable

Profitable on a per-share basis

ROE

0.1%

Weak

Weak capital efficiency

ROCE

-2.8%

Weak

Low return on total capital employed

Debt/Equity

Not available

No data

Source didn't return this field

Revenue Growth (YoY)

8.9%

Modest

Modest growth

Profit Growth (YoY)

-92.4%

Falling

Profits are shrinking

Dividend Yield

None

No dividend yield reported — usually means no payout, but verify if one was recently initiated

Free Cash Flow

-₹1 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹3.09

Operating Margin

3.3%

Weak

Thin margins leave little room for error

Net Margin

1.5%

Weak

Very little revenue reaches the bottom line

Current Ratio

2.09

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.81

Market-like

Moves roughly in line with the market

52W Range Position

46%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

3.2 / 3.2

Bullish alignment (short > long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

30.0

Oversold zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹13 Cr	₹14 Cr	₹11 Cr	₹10 Cr	-7.4%
EBITDA	₹0 Cr	₹1 Cr	₹1 Cr	₹0 Cr	-6.8%
EBITDA Margin	3.0%	9.2%	5.9%	3.1%	—
PAT (Net Profit)	₹0 Cr	₹0 Cr	₹0 Cr	₹0 Cr	-59.7%
EPS	₹0.01	₹0.04	₹0.01	₹0	-40.2%
ROE	1.1%	2.8%	0.9%	0.1%	—
ROCE	1.6%	7.9%	3.1%	-2.8%	—
Free Cash Flow	-₹1 Cr	₹2 Cr	₹0 Cr	-₹1 Cr	—

🔴 Revenue has shrunk at 7.4% a year over 3 years.

🔴 EBITDA has shrunk at 6.8% a year over 3 years.

🟡 EBITDA Margin has held roughly flat at 3.1% over 3 years.

🔴 PAT (Net Profit) has shrunk at 59.7% a year over 3 years.

🔴 EPS has shrunk at 40.2% a year over 3 years.

🔴 ROE has fallen from 1.1% to 0.1% over 3 years (-1.0 pts).

🔴 ROCE has fallen from 1.6% to -2.8% over 3 years (-4.4 pts).

Balance Sheet & Cash Flow — FY2026

Total Assets

₹11 Cr

Total Liabilities

₹4 Cr

Total Debt

—

Cash & Equivalents

₹0 Cr

Operating Cash Flow

-₹1 Cr

Capex

-₹0 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

34.2%

Peer Comparison

Company	P/E	ROE
SUN PHARMACEUTICAL IND L	34.9x	14.5%
DR. REDDY S LABORATORIES	31.0x	8.8%
CIPLA LTD	31.8x	9.8%
DIVI S LABORATORIES LTD	83.0x	17.5%

Recent News

6 general

Zenith Health Care Ltd. Key Financial Ratios – Valuation, Profitability & More

Value Research, 14 Oct

Top 14 Pharma Stocks To Buy In India October 2026

Samco, 17 Oct

Achyut Healthcare approves amalgamation with Zenith Healthcare

scanx.trade, 14 Jul

Zenith Health Care approves amalgamation with Achyut Healthcare

scanx.trade, 14 Jul

Zenith Capital Corp (OTC: ZHCLF) Stock Price, News & Analysis

Kalkine, 14 Oct

Zenith Drugs Ltd. Upper Circuit Today: Price, Data and Peers

Univest, 23 Sept

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.
1 metric couldn't be retrieved for this stock — this is more common for smaller or thinly-covered listings.
RSI is in oversold territory — could mean either a bargain or a stock still falling for good reason. Check the 'why' before assuming reversal.

DalalBaazaar Thesis

🔴Business QualityWeak5.9/20

🔴Financial HealthStretched8.4/20

🔴GrowthWeak2.4/20

🔴ProfitabilityWeak4.5/15

🟡ValuationFair8.3/15

🔴RiskHigh3.5/10

Weak on the fundamentals

Poor scores on business quality without a price low enough to compensate. There is no obvious argument for owning this over a stronger company at a similar valuation. 1 high-severity red flag sits above this conclusion and should be read first.

This thesis breaks if

✓EBITDA margin holds above 1%3.1%
✗Free cash flow remains positive-₹1 Cr
✗Interest cover stays above 3x-23.9x
✗ROCE stays above 8%-2.8%
✓Valuation vs its own median of 279.3x103.0x today