1QFY21 revenue was in-line but gross and EBITDA margin were lower by 300bps and 330bps YoY due to launch of low margin OTC products and increased employee expense by 21% YoY led by addition of new MR’s. Contribution of the new MRs is lower than expected as new launches are rescheduled on later dates for better traction among target clientele. The ongoing COVID related headwinds have delayed launches of new brands while its current portfolio of cardio-metabolic brands gained market share and outgrew industry growth. We continue to prefer ERIS as our top pick in mid-cap space due to 1) pure domestic play with insignificant regulatory and currency risk, 2) contribution of chronic/sub-chronic products with steady demand structure, 3) strong balance sheet and 4) less dependenace on Chinese API and KSM.
OutlookWe maintain BUY recommendation and retain TP of Rs576 based on PE 21x of FY22E.
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