Buy Biocon; target of Rs 340: Sharekhan

Sharekhan's research report on Biocon

Biocon registered mixed operating performance in Q2 with revenue growing in strong double digits, while higher cost pressures led to a decline in PAT. Revenue grew by 26% y-o-y to Rs. 2,319.7 crore, driven by strong 34% y-o-y growth in the biologics segment, 25.9% y-o-y growth in the research services segment, and 17.5% y-o-y growth in the generic segment. EBIDTA margin fell by 399 BPS to 20.3%; PAT was down by 10% y-o-y to Rs. 205.7 crore. Consolidation of Viatris and the strategic vaccines alliance with Serum Institute will add to growth of the Biosimilars business in H2FY2023. Margins might remain lower due to higher R&D cost.

Outlook

The stock is currently trading at 32.9/21.6x its FY2023/FY2024E earnings. We maintain our Buy rating on the stock with a revised PT of Rs. 340.