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Eris Lifesciences rallies 5% as Credit Suisse initiates coverage with outperform call

November 28
21:05 2017
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Eris Lifesciences share price rallied more than 5 percent intraday Tuesday after global brokerage house Credit Suisse has initiated coverage with outperform call on the stock.

It has set a target price for the stock at Rs 770 per share, implying 18.4 percent upside from Monday’s closing price.

Credit Suisse said Eris is a pure play in India pharma market with scalable business model. It has generated high free cash flow and used the same to accelerate growth.

Its free cash flow generation is at 60 percent of EBITDA. Eris has the best return profile and growth in the sector, it added.

The research house believes existing business should grow at 15 percent CAGR and entry into new areas should boost growth.

According to Credit Suisse, turnaround of recent four-loss making acquisitions could rerate the stock.

“Estimates of 24 percent profit CAGR over FY17-20 is the highest in our coverage,” it said.

With synergies coming in, market should be convinced on Eris’ ability to accelerate growth inorganically, Credit Suisse feels.

Recently Eris Lifesciences acquired India brand business of Strides Shasun for Rs 500 crore. It was the fourth acquisition by the company in last 18 months.

In previous month, it bought Pune-based UTH Healthcare for Rs 12.85 crore. UTH is largely engaged in the segments of obesity, diabetes, maternal nutrition and cardio-vascular diseases.

Eris’ profit grew by 34.5 percent year-on-year to Rs 93.14 crore and revenue from operations increased 25.3 percent to Rs 249.23 crore for quarter ended September 2017.

At 11:22 hours IST, the stock price was quoting at Rs 673.25, up Rs 23.00, or 3.54 percent on the BSE.

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