Sell Biocon; target of Rs 460: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's report on BioconBiocon’s PAT at INR 3.1b was well ahead of estimates due to extraordinary income of INR 3.1b during 2Q; adjusted for the same, PAT was flat YoY at INR 1.0b (14% lower than our estimates). Revenue grew 11% YoY (6% miss) to INR 8.3b, affected by weak performance of the biopharma segment. EBITDA at INR 1.9b was in line with estimates as margins improved 80bp YoY to 22.8% (v/s est. 22%).Modest earning outlook limits upside: We expect BIOS’ earnings outlook to remain muted (15% EPS CAGR v/s ~20% for peers) as big investment projects like biosimilars/Malaysia insulin plant are unlikely to generate significant revenue before FY18. With weak return ratios (12.3% RoE-FY15) and low free cash flows (high capex phase), valuation upside remains limited. Reiterate Sell with a target price of INR 460 (16x on SEP’17E EPS).Valuation and viewWe expect BIOS earnings outlook to remain subdued (14% EPS CAGR over FY15-18E) owing to (a) elevated R&D spend as molecules progress in clinical trials, (b) fixed overheads at Malaysia facility (INR 12b spent) with no meaningful revenue contribution till FY18E. While Biocon’s long term prospects in biosimilars space continue to remain appealing, current valuations of 17x FY17E and 15x FY18E leave limited valuation support. Maintain Sell rating with a target price of INR 460, says Motilal Oswal research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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