Eris Lifesciences Shares Gain As Motilal Oswal Initiates Coverage With A ‘Buy’
Shares of Eris Lifesciences Ltd. gained after Motilal Oswal initiated coverage on the pharma company with a ‘buy’.
“Eris Lifesciences has built a pure-play branded formulation business and has been the fastest-growing company in chronic therapy category,” the brokerage said in a Dec. 28 report. “It has a presence across the value chain in developing, manufacturing, and marketing of branded pharma products in select chronic therapies such as anti-diabetes, cardiac care, and vitamins, minerals, nutrients.”
Motilal Oswal expects the drugmaker’s earnings to grow at a 17% annualised rate over FY21–24 versus marginal growth during FY18–21. That, it said, would be driven by:
Higher scope of penetration of technically superior drugs in anti-diabetes therapy.
Its efforts to improve the coverage of super-specialists/high-end consulting physicians across therapies.
Better operating leverage.
Higher in-house manufacturing.
The brokerage also sees the Eris Lifesciences’ foray into insulin and its analogues through a supply tie-up with MJ Biopharm to bolster its anti-diabetics portfolio.
Shares of Eris Lifesciences rose as much as 7.40%, the biggest intraday gain in more than two weeks, to Rs 738 apiece on Tuesday. The stock closed with gains to the tune of 6.96% at Rs 735. Of the nine analysts tracking the company, seven recommend a ‘buy’ and two suggest a ‘hold’, according to Bloomberg data. The overall consensus 12-month price target implies an upside of 27.1%.
Here are other key highlights from Motilal Oswal’s report...
Initiates coverage with a ‘buy’ and a price target of Rs 870 apiece, implying an upside of 27%.
Ascribes a three-year industry average price-to-earnings multiple of 22x on 12-month forward earnings to arrive at the target price.
The firm’s PAT nearly doubled to Rs 350 crore during FY2016-2021.
The company has built an extensive range of products in oral anti-diabetics.
Rise in sales of Zomelis and Gluxit (treat type 2 diabetes) bode well for growth prospects.
Demand outlook for cardiovascular diseases remains strong. Eris has built key brands in this segment and intends to increase the coverage among super-specialty and high-end physical consultants by 50% over the next two years.
There is a strong visibility for new product offerings as at least one product is expected to go off-patent over the next 10 years in oral anti-diabetics therapy.
High number of Eris products coming under National Pharmaceutical Pricing Authority’s price control mechanism to impact its profitability.
Lower-than-expected prescriptions generated.
Slower-than-anticipated pickup in insulin sales and cardiac care segment.
Delay in new launches.