ERIS Lifesciences Ltd: Company Stock Analysis

Ventura 24 Feb 2024

Following robust organic growth in its initial year of FY23 post-acquisition, Oaknet Healthcare has propelled ERIS Lifesciences Ltd (ERIS) to a strong position within the dermatology sector. Through recent acquisitions in 2023, including 27 marquee brands from Dr. Reddy’s (9 brands), Glenmark Pharma (9 brands), and the ongoing Biocon deal (9 brands), ERIS has solidified its standing in the dermatology space. ERIS recently acquired a 51% stake in the dossier driven generic and specialty injectables major  Swiss Parenterals (SP) for a consideration of INR 637.5 cr (11-12x FY24 EV/EBITDA). This acquisition will not only add a new revenue stream but also provide ERIS with export opportunities for its oral dosages business leveraging SP’s well penetrated distribution network in 80 RoW markets along with EU.

The diabetic care segment, constituting the largest revenue share at 29%, is expected to showcase robust financial growth, supported by the strong financial performance of established brands (Glimisave, Cyblex, and Tendia), as well as the promising financial prospects of new-age products (Vildagliptin, Sitagliptin, and Dapagliflozin). Similarly, the cardiac care segment of the company, making up 21% of the revenue, is projected to mirror industry growth. This expectation is rooted in the presence of five flagship brands ranking among the Top-15, coupled with the impressive individual performance of Eritel, LNBloc, Olmin, Crevast, and Atorsave.

 In addition, ERIS has expanded its portfolio by acquiring 12 brands from Biocon in the nephrology segment. This strategic move ensures that ERIS is well-equipped to provide comprehensive patient care, particularly considering that its existing customer base in diabetic and cardiac care frequently experiences nephrological complications.

We initiate coverage with a BUY at the CMP of INR 868 per share (20.0X FY26 P/E) with a price target of INR 1,609 per share (37.1X FY26 P/E), representing an upside potential of 85.4% in the next 24 months.