Macquarie lowers its price target for Eris Life amid earnings dilution from recent acquisitions

International brokerage Macquarie cut its target price on Eris Lifesciences after the pharmaceutical player’s earnings fell below expectations.

Macquarie noted that while the company’s fourth-quarter revenues topped estimates by ten percent, EBITDA and PAT were well below forecasts.

Eris Lifesciences reported a net profit of Rs 79.6 crore for the March quarter of FY24, up 29.5 per cent over the year-ago period. The pharma company had posted a profit of Rs 61 crore in the same quarter last year.

Revenue was Rs 550.9 crore, up 36 per cent from the year-ago quarter of Rs 402.7 crore, the company reported on May 21.

The brokerage has decided to maintain its outperform call but lowered the target price to Rs 1,100 per share from Rs 1,230 earlier. Compared to the closing of the previous session, this represents an increase of approximately 20 percent.

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The company’s management will release consolidated guidance for FY25 after the first quarter results for FY25. Macquarie expects domestic revenues to grow by 12-14 percent and EBITDA margin to be around 36 percent.

The brokerage said it lowered its price target to reflect earnings dilution from its recent Eris Life acquisitions.

During the March quarter, Eris Lifesciences completed the acquisition of 28.5 lakh shares, or 51 per cent equity, of Swiss Parenterals for a consideration of Rs 637.5 crore. Post-FY24, Eris has further acquired 10.6 lakh shares or 19 per cent stake in the company for Rs 237.5 crore.

Eris Lifesciences also completed the acquisition of India’s branded pharmaceuticals business Biocon Biologics, which includes insulin, oncology and intensive care products, for Rs 1,242 crore amid decline in sales. The acquisition closed on April 1, 2024.

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