Prabhudas Lilladher recommended accumulate rating on Eris Lifesciences with a target price of Rs 576 in its research report dated Jun 03, 2020.
Prabhudas Lilladher's research report on Eris Lifesciences
We continue to prefer ERIS over other mid-cap companies due to 1) pure domestic play, very limited regulatory and currency risk, 2) contribution of chronic/sub-chronic products with consistent demand structure and 3) strong balance sheet. In FY20, ERIS had been in expansion mode by launching off-patent molecules, foray in new therapeutic and trade generics, in-licensing molecules and added new headcounts. However benefit from this expansion is yet to yield benefit and has led EBITDA margin to declined to 28-30% in 2HFY20 versus 37-38% in 1HFY20 mainly on account of marketing expense and increase in MR count.
We have increased our earnings estimates for FY21E and FY22E by 6% post encouraging growth in top-10 brands, better gross margin (85%) in Q4FY20 and management guidance. Maintaining PE 21x of FY22E earnings, our new TP is Rs576 (previous Rs547) and we also change our rating to 'Accumulate' (earlier BUY) due to recent rally in stock price.
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