Eris Lifesciences Q2 Review - Efforts Underway To Scale Up Acquired Business; Maintain Neutral: Motilal Oswal

Motilal Oswal Report

Eris Lifesciences Ltd. delivered in-line revenue/Ebitda in Q2 FY25, with moderate 7% YoY growth in base business. Eris continues to build presence across the value chain in the biologics segment. In addition to the acquisition of marketing strength of Biocon (Q1 FY25) and fill-finish dosage manufacturing unit (Q2 FY25), Eris has recently acquired a 30% stake in Levim to gain access to a bulk manufacturing facility and biologic product development expertise.

We trim our estimates by 6%/4%/2% for FY25/FY26/FY27 to factor in the shortage of insulin products and slower growth in base business. Compared to 50%/46% YoY growth in revenue/Ebitda in H1 FY25, we expect 53%/61% YoY growth in revenue/Ebitda for H2 FY25, largely due to acquisitions and new launches in focus therapies. We value Eris at 25 times 12 months forward earnings to arrive at a target price of Rs 1,230.

Eris has built growth levers in

1. the biologics segment through its presence across the value chain, and b) the injectable space through Swiss Parenterals.

However, considering the valuation, there is limited upside from current levels. Maintain Neutral.

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