IIFL has downgraded its rating on Biocon from buy to reduce with a target of Rs 233 in its report dated July 2, 2009.

"Biocon’s stock is up 100% since our upgrade to 'BUY' in January 2009 and we see limited upside from current levels. While the company is well on its way to establishing itself as a global biosimilars major (a business that we believe has high long-term potential), lack of near-term earnings growth is a cause for concern. Despite near-20% depreciation in the rupee, the company’s biopharmaceuticals revenues have remained almost flat over the last four quarters, indicating price erosion. We see no major topline growth driver for the next 1-2 years and core margins are likely to come under pressure in the near term. Even after assigning Rs 23 per share present value for the global glargine insulin opportunity, the stock is richly valued at 18.5x FY10ii core earnings. We revise our price target to Rs 233 and downgrade Biocon to 'REDUCE' from 'BUY', " says IIFL's research report.

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