Eris Lifesciences Gets HDFC Securities' 'Add' Downgrade On Scrip Run-Up

Eris is expanding its Bhopal facility with cartridge-filling by Dec'25. While the brokerage sees that growth investments are on track and Eris is now entering an execution phase for the next few years—largely led by anti-diabetic (insulins) and obesity (GLP-1) categories—its base business challenges persist (muted growth in cardiac and VMN).

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HDFC Securities Institutional Equities

Eris Lifesciences Ltd. is set to enter an execution phase after multiple merger and acquisitions over FY23–25, with an investment of Rs 38–40 billion to create multiple levers of growth, such as:

1. strengthening the diabetes portfolio,

2. foraying into the insulin business, critical care and oncology through the acquisition of Biocon Biologics India's business,

3. increasing focus on injectable and foraying into exports through the acquisition of Swiss Parenteral,

4. developing a new engine of growth by creating capabilities for the GLP-1 opportunity in India and EMs (through the acquisition of Levim), and

5. investing in new launches to drive organic growth (plant and field force expansions).

We note that GLP-1 is a large but competitive opportunity. Moreover, rh-insulin represents a sizable opportunity for the company over the next few years, with the exit of innovator Novo Nordisk (which will be present only in vials).

We note that Novo's brand clocked revenues of Rs 8.03 billion in FY25 (as per IQVIA), with ~Rs 6.02 billion as an available market (pen and cartridge share is ~75%).

Eris is expanding its Bhopal facility with cartridge-filling by Dec'25. While we see that growth investments are on track and Eris is now entering an execution phase for the next few years—largely led by anti-diabetic (insulins) and obesity (GLP-1) categories—its base business challenges persist (muted growth in cardiac and VMN).

While we have raised the multiple to 32x from 30x (implying 18x EV/E) for Q1 FY28E EPS and revised the target price to Rs 1,850, we downgrade Eris to Add from Buy, as the strong run-up in the stock price (up 39%/67% in the last 6/12 months) factors in near-term triggers. Debt reduction is a key monitorable.

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