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Weak margins

Eris Lifesciences’ (ERIS) Q1FY27 EBITDA growth was muted at INR 2.9bn; up 7% YoY. We see improvement from H2FY27E/FY28E supported by the continued ramp-up of Semaglutide, Bhopal commercialization and growth in the insulin franchise. Swiss Parenterals remediation work is likely to keep growth subdued in the near term, with management guiding for neutral to low-single-digit growth and ~200bps margin pressure. We expect margins to recover in 2HFY27E as Bhopal ramps up, with gross margins likely to improve from Q3FY27. The company has multiple growth levers including insulin analogues, Semaglutide, new product launches and a structurally higher-growth biologics portfolio. Our FY27 and FY28E EPS stands cut by ~6%/3%. We maintain ‘BUY’ rating with revised TP of INR 1,700 (valuing at 17x EV/EBITDA on FY28E).

Revenue growth led by DBF segment:

ERIS reported revenue growth of 13% YoY to INR 8.7bn, we est INR 8.4bn. Segment wise domestic formulations including Biocon business grew by 14% YoY aided by higher Semaglutide and Insulin sales. Swiss parenteral growth continues to remain muted at 6% YoY.

In line EBITDA; weak GMs:

EBITDA came in at INR 2.9bn (up 7% YoY) in line with our est. OPM declined both YoY and QoQ by 188bps/224bps at 33.9%. Domestic business formulation margins stood at 35% vs 37% in Q4FY26. Swiss parental margins were at 27% vs 32% in Q4FY26. Overall GMs remained weak, down by 351bps YoY and 291bps QoQ given likely change in the product mix and higher solvent prices. Other expenses increased by 10% YoY. PBT was up 12% YoY. Tax rate stood at 20%. Resultant PAT came in at INR 1.4bn. EPS of INR 10.28/share

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