Biocon Ltd. share price target

We maintain our BUY rating on the stock with a target price of Rs 405/share, implying a 12% upside potential from CMP

Biocon (BIOS) has received ‘Voluntary Action Indicated’ (VAI) status for its Malaysian site. With this, BIOS now has all critical sites for biosimilars under USFDA compliance, improving its business prospects in the US market.

Revenues stood at Rs. 3,590 crore, up 4% y-o-y and a 5% rise q-o-q. EBITDA reached Rs. 730 crore, down 1% y-o-y but up 24% q-o-q. PAT stood at Rs. 27 crore, a decline of 84% y-o-y and 97% q-o-q.

We maintain our BUY rating on the stock.

We have BUY on the stock

We recommend BUY With TP OF RS 390 which implies an upside of 10% from the current market price (CMP).

Biocon recently signed an exclusive licensing and supply agreement with Handok, a South Korean specialty pharma company for commercialization of synthetic liraglutide.

We have BUY on the stock

The company's capital allocation is on two fronts - R&D and the acquisition of Viatris.This has resulted in returns ratios falling below ~10% despite growth in the business. A huge looming net debt of $1.2 Bn could lead to further stake dilution in Biocon biologics. Recommendation: HOLD

We have maintained a Hold on stock.

Company Outlook & Guidance: Capital allocation on two fronts - R&D and the acquisition of Viatris - has resulted in returns ratios falling below ~10% despite the growth in the business. A huge looming net debt of $1.4 Bn could lead to further stake dilution in Biocon biologics.

Biocon’s Q1FY24 performance was dragged by the biologics biz. Profitability of the segment was under pressure owing higher rebates in Fulphila (USD 15mn). Segmental PBT dropped 600bps QoQ to 1.6% in Q1FY24. US market share of Fulphila and Ogivri expanded by 200bps and 100bps QoQ to 16% and 11%, and stable at 12% for bGlargine.

Biocon Limited’s (Biocon) Q4FY23 performance was boosted by consolidation of the acquired business of biosimilars (segment revenue up 114% YoY) from Viatris. Reported gross margin was inflated by ~150bps and EBITDA margin by 360bps due to licensing income of Rs1.75bn.