Comments
AnandRathi
Eris Lifesciences (Buy)
CMP: ₹399.45
Target: ₹614
Steady Q1 revenue growth. Driven by 10 per cent revenue growth in its base business and about 16 per cent in Strides (its acquired business), Eris’ Q1 revenue growth was about 9.4 per cent y/y, to ₹270 crore. Its chronic and sub-chronic therapies brought about 84 per cent to revenue and grew about 14 per cent y-o-y (versus 8.9 per cent IPM), while acute therapy revenue grew 6.3 per cent y-o-y (versus 6.7 per cent IPM), per AIOCD June 2019. Eris retains its focus on high-growth chronic therapies and specialty acute therapies (complementing its chronic range). We believe the base business and the Strides range would drive revenue growth and expect about 13 per cent revenue CAGR over FY19-21 to ₹1,260 crore.
Valuation: We believe the strong revenue growth, healthy EBITDA margin and low capex required, together with strong profit growth, would continue to result in healthy free-cash-flow generation. We maintain our ‘Buy’ rating on the stock, though with a lower target price of ₹614, based on 20x FY21e EPS. However, we lower our target multiple to 20x (from 24x earlier) on account of the market-wide contraction in valuation multiples owing to altered risk perceptions.
Risks: More products under the NLEM (national list of essential medicines), delay in execution, competition risk.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.