Accumulate Biocon; target of Rs 312: Dolat Capital

Dolat Capital is bullish on Biocon and has recommended accumulate rating on the stock with a target of Rs 312 in its January 28, 2013 research report.
 
“Biocon, revenues for the quarter grew 23.6% YoY to Rs 6.43bn, driven by higher revenues from both Biopharma & CRO segment. Biopharma revenues (ex licensing income) grew by a healthy 29% YoY to Rs 4.86bn primarily driven by immuno-suppressants along with increased traction in insulin. Ramp-up in Fidaxomicin bulk API supplies has meaningfully added to the momentum this quarter. Domestic branded formulations grew 19% YoY to Rs 855mn driven by growth in chronic therapies.The ensuing quarters shall reflect growth accelerating in this segment. Licensing development fees & income stood at Rs 88mn for the quarter (Q3FY12: Rs 310mn). Contract research revenue grew 27% YoY to Rs 1.4bn, partially led by favorable currency movement. Operating margins dipped by 100bps YoY to 23.4%. Raw material costs increased by 200bps YoY at 42.1% of sales while other expenses declined by 100bps YoY. R&D expenses inched up 30bps at 6.7% of sales. Tax rate during the quarter stood higher at 21% on account of expiry of tax benefits on its manufacturing units (12% in Q3FY12). Consequently, PAT (after minority interest) grew 8.1% to Rs 918mn.”
 
“The company shall be launching AlzumabTM (Itolizumab) indicated for psoriasis mid-FY14E and expects to garner Rs 1bn over four years. Biocon has also entered into agreement with BMS for oral insulin wherein BMS will have an exclusive option to further develop and commercialize IN-105, pending outcome of Ph-II clinical trial. The anticipated timeline on trials is 2 years. Major cost of clinical development will be borne by BMS. The in-licensing deal value is pre-determined. Biocon has completed second part of the EU Ph-III trials for biosimilar rh-Insulin. Data collation is underway and it expects filing to be done in 8- 9 months from now with launch expected in CY15E. The company is in advanced stages of discussion with partners for marketing its biosimilar Insulin portfolio in regulated markets.”
 
“Revenue scale-up in domestic branded business, fidaxomicin bulk and insulin sales, shall aid near-term revenue growth. The company aims to match ongoing R&D costs (excl. Biosimilar Insulin costs which are adequately funded) with potential licensing income. The company continues to actively capitalise on existing alliances and progress on to building new partnerships for its biosimilar insulin’s. At CMP, the stock trades at 13x FY14E and 11x FY15E earnings. We recommend Accumulate with revised target price of Rs 312 (13x FY15E EPS). The price target does not include any upside potential from out-licensing of lead candidates - the oral insulin molecule and Anti-CD6,” says Dolat Capital research report.

Bodies Corporate holding more than 50% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.

To read the full report click on the attachment

Read More