Buy Eris Lifesciences; target of Rs 1500: Prabhudas Lilladher

What happened

Prabhudas Lilladher maintained a BUY rating on Eris Lifesciences with a revised target price of Rs 1,500. The company's Q2FY27 EBITDA, which means earnings before interest, tax, depreciation and amortization, rose 7% year on year to INR 3.1bn, in line with estimates.

Confirmed

Global impact / market context

The broker expects profit to improve in the second half of the current fiscal year and the next as Semaglutide sales ramp up, the Bhopal plant starts commercial production and the insulin business grows, supporting the higher target price.

Analyst inference

Swiss Parenterals remediation work, meaning fixing manufacturing compliance issues, is likely to keep growth subdued near term, with management guiding for neutral to low-single-digit growth and roughly two hundred basis points of margin pressure, which means profit per sale falling.

Analyst inference

What to watch

1. Management guides for neutral to low-single-digit growth and roughly two hundred basis points of margin pressure while Swiss Parenterals remediation work continues, which means fixing manufacturing compliance issues at that unit. Confirmed
2. Investors should watch whether Bhopal commercialization ramps up and gross margins improve from the third quarter of the current fiscal year, since the broker expects margins to recover in the second half on these drivers. Analyst inference
3. The BUY rating and Rs 1,500 target price rest on valuing the stock at 15 times EV/EBITDA on the next fiscal year's estimates, which means 15 times enterprise value divided by earnings before interest, tax, depreciation and amortization. Proposed

Evidence

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