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Driven by standalone growth (14% to Rs3.5bn) and Oaknet’s contribution (Rs681m), Eris’ Q2 revenue grew 28% y/y to Rs4.6bn. The pick-up in recent launches would improve gross margins (now 77%). Higher employee and other expenses compressed the EBITDA margin to 32.9%. Amortisation for Oaknet led to flat profits of Rs1.2bn. The ramp-up in the Oaknet portfolio, insulin products and launches would drive 20%/19%/8% revenue/EBITDA/PAT CAGRs. We retain our Buy rating, with a lower TP of Rs860, rolling forward to 23x FY25e EPS.

Ramp-up in Oaknet’s contribution. Being the first quarter of full revenue contribution (Rs681m) from Oaknet, with a 24.2% EBITDA margin (EBITDA Rs165m). Eris is all set for launches (dermatology, cosmetology) in Oct’22. It aims to clock a Rs500m EBITDA in FY23 itself (earlier guidance given for FY24).

Growth across therapies outstrips market growth. In cardio-metabolic therapy, Eris grew 22% against the market’s 14.6%, and traction in gliptins and gliflozin should aid growth further. In dermatology, CNS, women’s health, Eris grew 25.3%, 950bps ahead of the market’s 15.8%. Expansion of specialists’ coverage, increase in yield per man and launches should boost growth. Zomelis has grown 9x on a monthly run rate to Rs93m within three years of acquisition (vs. Rs83m last year).

Anticipate better H2. The benefit of price hikes and product launches would reflect from H2. The 30% FY23 revenue growth guidance has been retained. This is driven by a) More than 15 launches, b) greater MR productivity (Eris+Oaknet), c) the benefit of price hikes to come in H2, d) a ramp-up in the insulin range and e) sustained growth in top brands such as Glimisave, Renerve, Zomelisa and Gluxit.

Valuation. At the CMP, the stock trades at 19x/18x FY24e/25e earnings. We have a Buy recommendation on it, with a lower TP of Rs.860 (23x FY25e EPS).

Risks: More products in the NLEM; delayed launches.

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