Biocon Q2 PAT seen up 7.1% at Rs 95.9 cr: Motilal Oswal

Motilal Oswal has come out with its second quarter (July-September) earnings estimates for the pharmaceutical sector. The brokerage house expects Biocon to report a 2.6 percent growth quarter-on-quarter (up 7.1 percent Y-o-Y) in net profit at Rs 95.9 crore.

Revenues of Biocon are expected to increase by 5.6 percent Q-o-Q (up 23.9 percent Y-o-Y) to Rs 733.8 crore, according to Motilal Oswal. Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 4.9 percent Q-o-Q (up 31.6 percent Y-o-Y) to Rs 153.4 crore. Motilal Oswal's Report on Biocon: We expect Biocon's sales to grow 24 percent Y-o-Y to INR 7.34 billion, led by 36 percent growth in CRO division. Biopharma division is likely to grow 17 percent Y-o-Y. We expect licensing income at INR 153 million (nil in 2QFY13). EBITDA is likely to grow 32 percent Y-o-Y to INR 1.53 billion and EBITDA margin would expand by 120bp to 20.9 percent due to superior sales mix and favorable currency. We expect adjusted PAT to grow just 7 percent Y-o-Y to INR 959 million due to base effect (high other income on 2QFY13). Key growth drivers for FY14/15 would be: (1) traction in Insulin initiative in RoW, (2) ramp-up in CRO division, (3) contribution from immunosuppressant supplies, and (4) branded formulations. However, high R&D costs and long-term capex would put pressure on near-term profitability and return ratios. The stock trades at 17.6x FY14E and 15.7 x FY15E earnings. Option values for the future include separate listing of Contract Research business and potential out-licensing of the Oral Insulin NCE by BMS. Return ratios are likely to remain subdued, with both RoE and RoCE in the 13-14 percent range over FY13-15. Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.