Leading brokerage Anand Rathi has given buy call to the stock of Eris Lifesciences Ltd for a target price of Rs 870 apiece with a potential gain of 26%. Driven by its standalone business (up 11%) and Oaknet acquisition (Rs315m), Eris' Q1 consolidated revenue grew 14% y/y to Rs4bn. The change in the product mix led to a 163bp drop in the gross margin to 78.7%.
1. Eris Lifesciences Ltd Stock Outlook
The current market price of the stock is Rs 695 apiece with a 52-week high of Rs 863 apiece and 52-week low of Rs 600 apiece. The stock has given a return of 74% in 3 years and 25% in 5 years. According to Anand Rathi, if you buy the stock now at the price of Rs 691, it has a potential to climb to Rs 870 with a potential gain of 26%.
2. Eris Lifesciences Ltd Dividend
The company declared an interim dividend of 735% or Rs 7.35 per share. The ex-dividend date is approaching fast and it is August 11, 2022. The dividend was announced on August 2, 2022. The company has a good dividend history and regularly declared dividend for the last 5 years.
3. Focus on key brands, set for good growth
The legendry brands such as Glimisave (anti-diabetes) and Renerve Plus (VMN) clocked more than Rs1bn revenue. The anti-diabetes drug, Zomelis, in the third year of launch, registered over Rs83m revenue a month. Eris aims at more than 20 launches (antidiabetes) in Q3. Strongly emerging therapies in dermatology (Oaknet), CNS and women's health (growing more than 25%) and robust growth in cardiometabolic therapies would drive ~28-30% revenue growth in FY23.
4. Margins likely to be affected
Eris expects ~30% revenue growth (~13% Oaknet, ~15% organic) in FY23, though the gross and EBITDA margins are likely to be impacted by the high investment and acquisition costs. We expect 33.5% and 34.3% EBITDA margins in FY23 and FY24 respectively.
At the CMP, the stock trades at 21x/18x FY23e/24e earnings. We have a Buy recommendation on it with an unchanged TP of Rs.870 (23x FY24e) EPS). Risks: More products in the NLEM; delay in launches.
6. About Eris Lifesciences Ltd
Eris Lifesciences Ltd is the only publicly listed Indian pharmaceutical company with a pure-play domestic branded formulations business model. Established in 2007, Eris is by far the youngest company in the IPM Top-25. Since inception, it has been focused on chronic and sub chronic lifestyle related therapies. It is a fully-integrated pan-India business with a strong focus on high-end super-specialist doctors and consulting physicians. Its revenues exceeded INR 1,200 crore for the year ended March 2021. The market capitalization is Rs 9,456.90 crore.
The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.