Eris Lifesciences (ERIS) reported moderate operating profit (up 2% YoY), due to higher promotional expenses from new launches. However, we believe benefits of operating leverage will play out, as revenue scales up from these launches. Further acquisition of Oaknet gives Eris an entry in the derma segment, currently operating at sub optimal profitability. Eris’s turnaround of Strides acquired portfolio provides comfort for similar execution. Further, the company continues to outperform cardio metabolic market (60% of its total revenues) which expects robust growth over next 3-4 years with wide patent expiration opportunities.
OutlookWe cut our FY23/24E EPS estimates by 5%/3% and maintain ‘BUY’ rating at TP of Rs825, valuing 17x EV/EBITDA on FY24E.
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