Sell Biocon; target of Rs 330: Motilal Oswal

Motilal Oswal's research report on Biocon

Biocon (BIOS) reported weak 1QFY18 results. Revenue declined 5% YoY to INR9.3b (est. of INR10b), mainly due to weak performance in the Small molecules (-17% YoY) and Branded formulation s (-13% YoY) segments. With commercialization of the Malaysian plant, operational expense and fixed cost (depreciation and interest cost) increased ~USD12m, leading to a 27% YoY decline in EBITDA to INR1.9b (est. of INR2.3b). Margin for the quarter came in at 20.6% (-530bp YoY), with employee expenses up ~400bp YoY (as % of sales).

Outlook

However, we have increased our TP multiple on the back of enhanced visibility of Biologics launch in the EU and US markets. Maintain Sell with a TP of INR 330 @ 2 3x FY1 9E EPS (v/s INR 300 @ 20 x FY1 9E EPS).