1. Citi ups Biocon target price to Rs 935; raises EPS

Citi ups Biocon target price to Rs 935; raises EPS

Biocon is an integrated biotechnology company in India that encompasses all critical stages of drug development - drug discovery, development, and manufacturing and commercialization of biopharmaceuticals and enzymes.

By: | Published: July 28, 2016 6:05 AM
Biocon, Biocon News, Biocon Share Price The Q1FY17 numbers are skewed on transition to Ind AS accounting, making it difficult to compare with our forecasts but trends were positive

We increase our TP to `935 (vs. `675), as we raise FY17-18E EPS by 7%/6%, move to a higher target PE (25x vs. 21x) and roll over to March 18E. Biosimilars is a very promising opportunity and we now see tangible progress (filings, approvals) in Biocon’s efforts to target the same. It had to absorb significant pressure on profitability and B/S due to the relatively small size of its legacy biz but this also implies higher leverage on commercialisation. We reflect this in our valuation, building a premium to mid-cap peers but much below pure biosimilar play, Celltrion (35-40x).

The Q1FY17 numbers are skewed on transition to Ind AS accounting, making it difficult to compare with our forecasts but trends were positive: revenues or EBITDA orPAT grew 21%/28%/35% y-o-y; Branded formulations and small molecules witnessed good growth after a few quarters while research services (+18%) continued its healthy trend and Biologics (+71%) saw meaningful traction in emerging markets; R&D spend was on the lower side in Q1 (7.2% of biopharma sales, should normalize at c12-14% in FY17) but EBITDA margin (pre- R&D) also improved 56bps y-o-y and 96bps q-o-q .

Biocon is an integrated biotechnology company in India that encompasses all critical stages of drug development – drug discovery, development, and manufacturing and commercialization of biopharmaceuticals and enzymes.

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