Motilal Oswal Financial Services upgrades Biocon to Buy, target price Rs 430

Motilal Oswal Financial Services has a buy call on Biocon with a target price of Rs 430. The current market price of Biocon is Rs 382.8. Biocon, incorporated in 1978, is a Large Cap company with a market cap of Rs 45970.97 crore, operating in the pharmaceuticals sector.

Biocon's key products/revenue segments include Bio Pharmaceuticals, Other Operating Revenue, Waste and Sale of services for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 3622.90 crore, down -20.68% from last quarter Total Income of Rs 4567.40 crore and up .07% from last year same quarter Total Income of Rs 3620.20 crore. The company has reported net profit after tax of Rs 27.10 crore in the latest quarter.

The company's top management includes Ms.Kiran Mazumdar Shaw, Mr.Nicholas Robert Haggar, Ms.Rekha Mehrotra Menon, Mr.Naina Lal Kidwai, Mr.Bobby Kanubhai Parikh, Mr.Meleveetil Damodaran, Mr.Eric Vivek Mazumdar, Prof.Ravi Rasendra Mazumdar, Mr.Siddharth Mittal, Mr.Atul Dhawan. Company has B S R & Co. LLP as its auditors. As on 30-09-2024, the company has a total of 120 Crore shares outstanding.

Investment Rationale
Delayed compliance at the Biocon Park/Malaysian site and increased debt (due to the Viatris deal) led to a significant earnings decline for BIOS over the past two years. Compliance at Biocon Park also provides potential opportunities for BIOS from Liraglutide. Additionally, the Malaysian site enhances the scope for broadening BIOS?s biosimilar offerings in the US market. Overall, Motilal Oswal Financial Services expects a 16% CAGR in biologics sales over FY25-27. On an overall basis, they expect 21% EBITDA CAGR over FY25-27. Considering the efforts toward compliance and potential business from upcoming products, Motilal Oswal has increased the EV/EBITDA multiple for the biologics business to 22x on a 12M forward basis. They further add 53% stake of Syngene and value the generics business at 14x EV/EBITDA to arrive at an SOTP-based target price of Rs 430. The timely approval for B-Aspart can provide further potential upside to biologics sales over FY25-27. Upgrade to BUY.

Promoter/FII Holdings
Promoters held 60.64 per cent stake in the company as of 30-Sep-2024, while FIIs owned 5.93 per cent, DIIs 14.42 per cent.