Buy Biocon; target of Rs 460: Motilal Oswal

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26 Aug, 2025 12:21

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Biocon (BIOS) is fully integrating Biocon Biologics (BBL) by acquiring the remaining stake of 23.3%. In addition to the share swap, BIOS is raising additional capital through a QIP of up to INR45b, subject to shareholder approval, for the cash component payable to Viatris. The deal will eliminate the minority interest as BBL will become a wholly owned subsidiary of BIOS. However, the addition of equity shares would result in EPS dilution. Accordingly, we trim our earnings estimates by 9%/8% for FY27/FY28.

We value BIOS on SOTP basis (22x 12M fwd EV/EBITDA for biologics business, 53% stake in Syngene, and 10x EV/EBITDA for generics business) to arrive at a TP of INR460. While the equity dilution and QIP process may create a near-term drag on stock price, business prospects remain encouraging on the back of a) product launches (namely insulin aspart) in biologics segment and subsequent market share gain, b) scale-up of generics business, and c) growth/operating leverage in Syngene business. Maintain BUY.

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