Motilal Oswal Financial

Eris Lifesciences (Buy)

Target: ₹870

CMP: ₹733.05

We initiate coverage on Eris Lifesciences (ERIS) with a Buy rating and a target price of ₹870. In just 14 years (founded in CY07), Eris has built a pure-play branded formulation business, with a revenue of ₹1,300 crore (12 month ending Sep’21). Notably, its PAT has nearly doubled to ₹350 crore during FY16–21.

Eris Lifesciences ranks among the Top 25 Indian companies in revenue terms. It has presence across the value chain in developing, manufacturing, and marketing of branded pharma products in select chronic therapies (the fastest growing company in chronic category), such as anti diabetes, cardiac care, and vitamins/minerals/nutrients.

We expect a 17 per cent earnings CAGR for Eris over FY21–24 versus marginal earnings growth during FY18–21, driven by: higher scope of penetration of technically superior drugs in AD therapy (adding Insulin-analogs to the AD portfolio); its efforts to improve the coverage of super-specialists/high-end consulting physicians across therapies; better operating leverage on improved MR productivity; and higher in-house manufacturing.

We ascribe a three-year industry average P/E multiple of 22x on 12M forward earnings to arrive at our target price.

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