Buy Biocon; target of Rs 320: Unicon Investment

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Buy Biocon; target of Rs 320: Unicon Investment

Unicon Investment is bullish on Biocon and has recommended buy rating on the stock with a target of Rs 320 in its January 30, 2012 research report.

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Unicon Investment is bullish on Biocon and has recommended buy rating on the stock with a target of Rs 320 in its January 30, 2012 research report.

"Biocon Ltd. (Biocon) reported revenue growth of 1.4% YoY in Q3FY12 and the revenue stood at INR 5185 mn, which was majorly in line with our estimates (INR 5211 mn). The flat revenue growth was due to drop in licensing income (LI) by 62% YoY in Q3FY12 to INR 290 mn. However excluding the LI, the revenue grew by 13% YoY. The operating margin contracted by 730 bps and stood at 24.8%. The operating profit was registered at INR 1287 mn, down 22% YoY. Resultant PAT was down by 16% YoY at INR 849 mn."

"Branded formulations vertical that contributed 14% of the Q3FY12 revenue, reported a growth of 49% YoY. Biocon launched INSUPEN (insulin delivery device) in October 2011, which is gaining traction in the market thus giving a boost to the revenue. Immuno-suppressants grew by 40% YoY backed by strong Tacrolimus and MMF sales. Contract research services vertical posted a robust growth of 42% YoY. Biopharmaceutical division which includes LI remained down 13%. However in constant currency terms, the segment reported growth of 5%. The company reported a forex gain of INR 40 mn during the quarter."

"Management is positive on the research services business and the plan for Syngene IPO remains committed with a time frame of 12-18 months. The company plans to intensify its focus on emerging markets with potential growth of API & insulin portfolio. Biocon is positive on Fidaxomicin and Statins revenue growth in coming quarters. Drop in licensing income doesn't seem to concern the company's revenue going forward as the company expects it to be a subject of variability. Biocon is in discussion with potential partners for oral insulin IN-105 program. The company plans a capex of INR 2000 mn during FY12 and around INR 3000 mn during FY13."

"Biocon has been known for its novel programs and research services. Anti-CD20 and fusion MAbs, the novel molecules are at advance stage of development. The company is confident about increasing its revenue through research services. Licensing income remains a variable quotient for the company, though if included will give a boost to the EBITDA margins. EBITDA margins excluding LI are expected to stand at 26-27%. We expect the company to maintain its margins at the current level and the revenues to grow at 15% CAGR (Ex LI). Currently the stock is trading at 11.1x FY13e earnings. We recommend BUY with the target price of INR 320," says Unicon Investment research report.  

Public holding more than 90% in Indian cos

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To read the full report click on the attachment