October 25, 2016 / 16:45 IST
Axis Direct's research report on Biocon Q2FY17 PAT (up 29% YoY) was 9% higher than our estimate due to higher other income. However, 11% YoY growth in revenue/EBITDA was 5% below estimates given muted growth in Biologics (9% YoY) and 14% YoY decline in India business. While EBITDA margin was flat YoY at 23%, margin (ex-Syngene) was at 17% (declined 180 bps YoY/ 400 bps QoQ). Biocon maintains to file four biosimilar products in FY17and R&D expense at ~12% of bio-pharma sales (10% in Q2/ 9% in H1).
We raise our FY17/18F estimates by 10%/6.6%, driven by higher interest income and TP by 20% to Rs 960 {rollforward to 22x Sep-18E EPS (vs.22x FY18E)+ R&D value to Rs 160}. While core earnings are likely to remain muted in next 12-18m assuming higher depreciation at Malaysia plant, we maintain HOLD on back of advancing biosimilar pipeline which is expected to start contributing from FY19.
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