We expect a 17% 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, Motilal Oswal said
Eris Lifesciences Ltd.
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Eris Lifesciences share price gained over 6 percent on December 218 after Motilal Oswal initiated coverage on the stock with a ‘buy’ call.
The domestic research firm has initiated coverage on Eris Lifesciences with a ‘buy’ rating and a target price of Rs 870 per share, an upside of 20 percent from current market price.
“In just 14 years, Eris has built a pure-play branded formulations business, with a revenue of Rs 13 billion (12 months ending September). Notably, its PAT has nearly doubled to Rs 3.5 billion during FY16–21. The company ranks among the top 25 Indian companies in revenue terms,” the research firm said.
The company has presence across the value chain in developing, manufacturing, and marketing of branded pharma products in select chronic therapies as the fastest growing company in the chronic category, such as anti-diabetes, cardiac care and vitamins/minerals/nutrients.
“We expect a 17 percent 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, 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,” Motilal Oswal said.
“We ascribe a three-year industry average P/E multiple of 22x on 12M forward earnings to arrive at our target.”
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The brokerage firm believes that there is a strong visibility for new product offerings as at least one product is expected to go off-patent over the next 10 years in OAD therapy. Additionally, foray into insulin and its analogues through supply tie-up with MJ Biopharm would bolster the company’s portfolio in AD.
Further, Eris continues to provide medical equipment to track critical parameters for better diabetes management. Thus, its product and service offerings play a vital role in improving the prescription pace of its products, Motilal Oswal said.
The brokerage projects a 19 percent sales CAGR in this category over FY21–24, given the under-penetration of newer molecules (DPP4/SGLT2 inhibitors and Insulin analogues), its established brand franchise, and better connect with patients through improved services.
Eris Lifesciences was trading at Rs 729.70, up Rs 42.55, or 6.19 percent at 12:03pm. It has touched an intraday high of Rs 732.45 and an intraday low of Rs 705.
The scrip was trading with volumes of 276,520 shares, compared to its five day average of 37,972 shares, an increase of 628.22 percent.
