Biocon reported Q1FY16 net profit Rs 12,620 crore (23% y-o-y). This includes Rs 4,500 crore of one-time payment from Merck against cancellation of clause for capacity reservation fee for fidaxomicin supply. Adjusting for this one-off, net profit at Rs 8120 crore (-21.1% y-o-y) were 27.5% & 21.5% lower than HSBCe & consensus. Core revenues at Rs 790 crore (9.7% yoy) were 4.4% below HSBCe due to weak BioPharma (ex-licensing income) and India formulations sales. Ebitda margins at 21.2% were c220bps below HSBCe due to higher material, staff & R&D expenses. The company booked forex gain of Rs 650 crore during Q1FY16.
Core biopharma sales at Rs 420 crore were broadly flat on y-o-y basis due to limited product supply on planned facility shut-down for maintenance. We expect sales to pick up as insulin & biosimilars gain traction in emerging markets as its Malaysia facility is on track to start commercial sales from 2016. India branded formulations sales at Rs 110 crore were flat y-o-y but grew 14% q-oq as the company continues to rationalise its product portfolio as a part of its strategic shift to specialty segments. Biocon stated that this segment is on track to achieve 20% sales contribution by 2019 (currently 14%).
We maintain hold and view announced IPO of subsidiary Syngene as potential value unlocking catalyst. Our revised fair value target price is R431.