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Better product mix and softening of input costs played out well
Eris Lifesciences Ltd. reported a revenue growth of 17.1% YoY / up 15.8% QoQ to Rs. 4,666 mn and was above market expectations of Rs. 4,050 mn. The company’s strong performance was driven by growth in branded formulations business and Oakanet consolidation. EBITDA for the quarter grew 31.4% YoY / up 42.8% QoQ to Rs.1,697 mn. OPM during the quarter expanded by 396bps YoY to 36.4% in Q1FY24, aided by expansion in gross margins by 455bps YoY to 83.2%. Net income stood at Rs. 936 mn, higher 0.6% YoY / up 52.3% QoQ in Q1FY24. PAT margin stood at 20.1% versus 15.3% in the previous quarter. Further, the company remains on track to improve the profitability of acquired businesses and build a new launch of product pipeline going ahead.
Key Concall Highlights
- Base business outlook: The company’s Top-20 power brands account for 70% of revenues in Q1FY24. Out of these, 15 brands are ranked among the Top-5 in their respective segments. We expect this portfolio to continue growing well in the coming years.
- New product launches: Eris will launch about 8-10 new products in dermatology categories in the remainder of FY24 and expand product ranges in Women’s Health therapies.
- Focus on therapy diversification: The company has a strong focus on therapy diversification, with three emerging therapies (Derma, CNS & Women’s Health) accounting for 26% of Branded Formulations revenue in Q1FY24. Further, Eris will continue to invest in these therapies to get higher revenue growth.
- Physician coverage: Eris continues to make good progress in expanding coverage of Specialists and Consulting Physicians and is expected to add more MR in FY24. Debt repayment: Eris is planning to repay debt and aiming to be below Rs. 4,000 mn net debt by the end of FY24.
- Other key highlights:
- The company is targeting to launch four first-in-market combinations through its R&D pipeline and
- the relaunch opportunity for FCM injection at-risk products in FY24.
- Eris is expected to launch Glargine and Liraglutide injectable diabetics from MJ’s pipeline in
- Q4FY24.
- The company plans to enter the pediatric dermatology segment starting Q2FY24.
Valuation and Outlook
Eris Lifesciences Ltd. recorded robust annual revenue growth in Q1FY24 led by the smooth integration of Oaknet operations and the gradual ramp-up in capacity utilization levels that aided growth during the quarter. The company expects margins to remain healthy as revenue scales up from recent acquisitions which are currently operating at sub-optimal profitability. Further, the company planned new launches in Dermatology and aims to expand product ranges in Women’s Health therapies. The company also has multiple growth levers such as healthy product launches in the cardio, diabetes and derma segment, reducing losses in the insulin business and better capacity utilization.
Going ahead, we expect the company to outperform within the cardio-metabolic and derma market and expect robust growth over the next 2-3 years with wide patent expiration opportunities.
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