Eris Lifesciences shares zoom 7% after Motilal Oswal initiates coverage

Brokerage house Motilal Oswal has maintained a ‘Buy’ rating on Eris Lifesciences Limited stock with a target price of Rs 870 per share.
 
The stock rose 7.54 per cent to hit an intraday high of Rs 739 on the Bombay Stock Exchange (BSE). It ended 6.96 per cent higher at Rs 735 against the previous close of Rs 687.20.
 
With a market capitalisation of more than 9,900 crore, the shares stand higher than 5 day, 20 day and 200 day moving averages but lower than 50 day and 100 day moving averages.
 
“The company ranks among the Top 25 Indian companies in revenue terms. ERIS has a presence across the value chain in developing, manufacturing, and marketing branded pharma products in select Chronic therapies, such as Anti-Diabetes (AD; 37 per cent of sales), Cardiac Care (31 per cent of sales), and Vitamins/Minerals/Nutrients (VMNs; 23 per cent of sales),” Motilal Oswal said in its report.
 
The brokerage firm expects a 17 per cent earnings CAGR for ERIS over FY21–24 versus marginal earnings growth during FY18–21, driven by the higher scope of penetration of technically superior drugs in AD therapy (adding Insulin-analogs to the AD portfolio), 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.
 
It noted that ERIS has delivered a 13 per cent revenue CAGR, with a steady 35 per cent EBITDA margin over FY17-21. The EBITDA margin improved to 39 per cent in 2QFY22. The Indian formulation and the chronic therapy businesses are expected to register a revenue CAGR of 11 and 13-14 per cent, respectively, led by increasing population in the 15-64 and 60+ age groups, rising per capita incomes, and changing lifestyles.
 
The brokerage house added that ERIS has created a niche for itself in the branded domestic formulation segment, with a substantial focus on chronic and sub-chronic therapies. With a focus on diabetes/cardiac care and VMN, ERIS has outperformed these therapies at the industry level for the past two years.
 
Recently, the diabetes major announced a joint venture with Mumbai-based MJ Biopharm to enter India’s insulin segment.
 
Eris will now extend its product offering to insulins and GLP1 agonists. These categories comprise 61 per cent of the anti-diabetes market in the USA, whereas their penetration is just 21 per cent in India, noted Eris Lifesciences in an official statement.
 
The 70:30 JV, with Eris holding a 70 per cent stake, will primarily engage in marketing and distribution of Human and Analogue Insulin including Aspart, Glargine and Lispro and GLP-1 agonists and potentially other biopharma products in India. While MJ Biopharm will be responsible for the development, manufacturing and supply of these products to the JV.