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Nirmal Bang Report
Eris Lifesciences Ltd.'s Q3 FY24 performance was largely in line with NBIE estimate, but there was disappointment on profit after tax on account of higher-than-expected tax outgo.
Branded Formulations business (97% of revenue) grew by 16% YoY on the back of robust growth in the Chronic business and scale-up in the Insulin business. Margin improvement was led by softening input costs.
Eris Lifesciences has proposed to acquire 70% stake in Swiss Parenteral Sterile Injectables business (revenue of ~Rs 2.8 billion as of FY23) for Rs 63.75 billion (P/S of ~4.4 times), funded through a mix of internal accruals and borrowings.
We like the strategic intent as through this acquisition, Eris is foraying into the fast growing Parenteral segment with more than 1,000 dossiers along with 40 molecules.
Eris also gets access to SWISS RoW market through this deal. The deal will be EPS dilutive for the first couple of years, but the management is confident of making it earning per share accretive in FY26.
We like Eris due to its pure domestic play, speciality focus, strong financials, healthy balance sheet and high return ratios. We maintain BUY with a target price of Rs 1,077, valuing it at 14 times December 25E enterprise value/Ebitda.
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