ZIM Laboratories Limited

Healthcare — Drug Manufacturers - Specialty & Generic · NSE

₹142.66+₹2.36 (+1.68%)

DalalBaazaar Score

34 / 100

🔴 Weak

Verdict

CAUTION

Risk

High

Driven by micro-cap size, which brings thin liquidity, a very high earnings multiple, which leaves little margin for disappointment, falling profits.

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. Valuation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:49 pm

Understanding the Business

Company site ↗

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

What does this company do?

ZIM Laboratories Limited engages in the development, manufacture, and supply of generic pharmaceutical and nutraceutical products in India and internationally.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Employees632

Annual revenue₹360 Cr

How does it make money?

Turns over ₹360 Cr a year. Of every ₹100 of sales, about ₹2 reaches shareholders as profit, with ₹11 left at the operating level before interest, tax and depreciation. Each of its 632 employees supports ₹57.0 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹57.0 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.

Compared side by side in Peers ↓

What is its competitive advantage?Little sign of one

Returns on capital of 5.8% 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.

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 -7% while net margin moved -74% 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-7%

Margin effect-74%

DalalBaazaar Score

34/ 100

Weak

Weighted across six categories. Every point is explained below.

✗ Revenue has contracted at 2.5% a year
✗ Profit has declined at 37.9% a year
✗ Profit fell 52.0% in the latest year

Quality vs. Valuation

Company Quality

33/ 100

Weak

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

Valuation

29/ 100

Expensive

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

174.0x

3Y Median

28.9x

40 monthly readings · mean 36.9x · range 19.0x–121.6x

Sector Median

33.3x

median of 4 sector peers

⚠️Current valuation is approximately 503% above its 3y median of 28.9x. Paying more than usual needs a reason — faster growth, a better balance sheet, or a re-rating you believe in.

⚠️Against its sector it trades 422% above the peer median of 33.3x.

vs. its own history

Expensive

28.9x median over 40 months · +503%

vs. sector peers

Expensive

33.3x median of 4 peers · +422%

vs. generic bands

Expensive

Above 35x

EV/EBITDA

22.5x

PEG

—

What's Good / What's Bad

🟢 What's Going Well2

Cash generation is improving
Free cash flow is up 243% over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention2

Return on equity is falling
ROE has dropped from 12.2% to 2.0% — each rupee of shareholder capital earns less than it did.
Return on capital is falling
ROCE has declined from 17.5% to 5.8% — often a sign of competition or overexpansion.

Red Flags

6 items require attention · 3 high · 3 watch

🔴Debt has risen sharplyFinancial
Total debt is up 104% over 3 years, from ₹62 Cr to ₹126 Cr.
🔴Thin interest coverageFinancial
Operating profit covers interest only 1.7x — little room if earnings dip.
🔴Inventory building faster than salesFinancial
Inventory up 75% against revenue up -7% — stock may not be moving.
🟡Interest coverage is deterioratingFinancial
Cover has fallen from 2.8x to 1.7x.
🟡Profit is decliningFinancial
Net profit is down 76% over 3 years.
🟡Margins are compressingFinancial
EBITDA margin is down 4.3 points over 3 years.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Self-funding with balance-sheet headroom
Positive free cash flow of ₹5 Cr alongside low debt means growth, buybacks or dividends need no outside money — and a downturn can be absorbed rather than refinanced.
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?

Margins are being competed away
EBITDA margin has fallen from 15.0% to 10.7%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
The debt load needs earnings to hold up
Debt is 3.3x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
The price already assumes success
The stock trades 503% above its own median multiple. At this level the business has to deliver just to stand still, and a stumble is repriced twice — lower earnings on a lower multiple.
Returns on shareholder capital are falling
ROE has dropped from 12.2% to 2.0%. Each rupee of equity earns less than it did, so profit growth increasingly depends on raising more capital rather than on the existing base working harder.
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 9%✓ 10.7%
Two points below today's level — enough room for noise, tight enough to catch real compression.
2Debt / EBITDA falls below 3x✗ 3.3x
Already stretched, so this is a reduction target rather than a level to hold. Around 3x is where lenders typically start attaching conditions.
3Interest cover stays above 3x✗ 1.7x
How much operating profit can fall before interest stops being comfortably covered.
4Free cash flow remains positive✓ ₹5 Cr
Profit that never becomes cash eventually stops being profit.
5ROCE stays above 8%✗ 5.8%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

6 / 11 checks passed

✗ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✓ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ 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

4 good · 3 neutral · 4 weak

Market Cap

₹764 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

174.0x

Expensive

Expensive — verify against sector peers

P/B Ratio

2.58x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹0.82

Profitable

Profitable on a per-share basis

ROE

2.0%

Weak

Weak capital efficiency

ROCE

5.8%

Weak

Low return on total capital employed

Debt/Equity

0.43x

Low

Conservative leverage

Revenue Growth (YoY)

31.2%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-52.0%

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

₹5 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

Operating Margin

-3.1%

Weak

Thin margins leave little room for error

Net Margin

0.9%

Weak

Very little revenue reaches the bottom line

Current Ratio

1.45

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.82

Market-like

Moves roughly in line with the market

52W Range Position

83%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

140.2 / 130.0

Bullish alignment (short > long)

Price vs SMA 200

Above

Long-term uptrend

RSI (14)

56.0

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹389 Cr	₹356 Cr	₹363 Cr	₹360 Cr	-2.5%
EBITDA	₹58 Cr	₹47 Cr	₹50 Cr	₹39 Cr	-13.0%
EBITDA Margin	15.0%	13.1%	13.9%	10.7%	—
PAT (Net Profit)	₹24 Cr	₹17 Cr	₹12 Cr	₹6 Cr	-37.9%
EPS	₹5.01	₹3.54	₹2.5	₹1.19	-38.1%
ROE	12.2%	7.2%	4.8%	2.0%	—
ROCE	17.5%	10.3%	9.2%	5.8%	—
Total Debt	₹62 Cr	₹112 Cr	₹118 Cr	₹126 Cr	+26.8%
Free Cash Flow	₹2 Cr	-₹58 Cr	₹0 Cr	₹5 Cr	+50.8%

🔴 Revenue has shrunk at 2.5% a year over 3 years.

🔴 EBITDA has shrunk at 13.0% a year over 3 years.

🔴 EBITDA Margin has fallen from 15.0% to 10.7% over 3 years (-4.3 pts).

🔴 PAT (Net Profit) has shrunk at 37.9% a year over 3 years.

🔴 EPS has shrunk at 38.1% a year over 3 years.

🔴 ROE has fallen from 12.2% to 2.0% over 3 years (-10.2 pts).

🔴 ROCE has fallen from 17.5% to 5.8% over 3 years (-11.7 pts).

🔴 Total Debt has grown at 26.8% a year over 3 years.

🟢 Free Cash Flow has grown at 50.8% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹539 Cr

Total Liabilities

₹243 Cr

Cash & Equivalents

₹25 Cr

Operating Cash Flow

₹50 Cr

Capex

-₹44 Cr

Shareholding (proxy)

Institutional Holding

1.2%

Insider Holding

71.2%

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

1 negative5 general

Zim Laboratories vs Nifty 50: 1Y Return +113.83% vs -11.35%

Univest, 13 Oct

Zim Labs secures TGA GMP cert for Nagpur facility

scanx.trade, 16 Oct

ZIM Lab Consolidated June 2026 Net Sales at Rs 94.18 crore, up 31.25% Y-o-Y

Moneycontrol.com, 14 Aug

Zim Laboratories Q4 Net Profit Falls 24% to ₹3.7 Cr on Marginal Revenue Decline

Sahi, 19 MayResults

🔴Potentially negativeReported deterioration, which feeds the growth and margin inputs on this page directly.

Zim Laboratories Share Price Near 52-Week High, 6.75% Up

Univest, 09 Oct

Zim Laboratories promoter acquires 80,000 shares at ₹107.50

scanx.trade, 16 Jun

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

MiddlingFinancial Health

WeakBusiness Quality · Growth · Profitability · Valuation · Risk

Points for each in the Score ↑

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. 3 high-severity red flags sit above this conclusion and should be read first.

3 of 5 tripwires tripped — Debt / EBITDA falls below 3x; Interest cover stays above 3x; ROCE stays above 8% · see Key things to watch ↑