Accumulate Biocon; target of Rs 536: Dolat Capital

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26 Aug, 2025 12:21

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Dolat Capital`s research report on Biocon“Biocon’s revenue for the quarter grew 2.1% YoY to Rs 7.5bn, mainly on account of decline in Biopharma segment. The decline was on account of geo-political challenges in terms of credit risk in the MENA region, capacity constraints due to allocation of development batches for biosimilars and reduced off-take of fidaxomicin supply by Cubist pharma (re-positioning of portfolio). Moreover, the outlook for the biopharma biz. remains challenging for the remaining part of FY15E. Biopharma revenues (ex-licensing income and biopharma India biz.) declined 2.6% YoY to Rs 4.3bn. Domestic branded formulations grew at 17.3% YoY to Rs 1.2bn. The company is taking steps for re-organisation of branded formulation verticals over the past few months and aims at driving synergies around key anchor brands and optimisation of product portfolio in CVS and diabetes segment. Contract research revenues grew 2.1% YoY to Rs 1.9bn. However, on sequential basis it has shown a growth of 11.5%. Operating margins declined by 90bps YoY to 22.8%. Gross R&D expenses stood at Rs 560mn (10.2% of total biopharma sales), of which Rs 350mn were recognized in the P&L, Rs 140mn were capitalised and Rs 70mn were balanced against deferred revenues. Going forward, management expects R&D expenses to increase in coming quarters. Tax rate for the quarter stood 16.9% vs 23.3% in Q2FY14. Consequently, reported PAT remained constant at Rs 1.02bn.” “We estimate Biopharma biz. (ex-licensing income and biopharma India biz.) to remain muted in H2FY15E as well, due to capacity constraints and reduced offtake of Fidaxomicin supply. However, biopharma- India sales is expected to show a robust growth of 20% in FY15E, and contract research revenues to show 15% growth in FY15E. We cut FY15/16E earnings by 9% on account of challenges faced in the Biopharma biz. and delay in commercialisation of Malaysian facility. We introduce FY17 and estimate 15% CAGR in earnings during FY14-17E. At CMP, the stock trades at 17.7x FY16E and 15.2x FY17E earnings. We maintain ‘Accumulate’ with a target price of Rs 536 (17x FY17E EPS),” says Dolat Capital research report.

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