Biocon -In-line sales and higher EBITDA margin; expect muted 2H.:: Kotak Sec,

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Biocon (BIOS)
Pharmaceuticals
In-line sales and higher EBITDA margin; expect muted 2H. PAT at Rs892 mn was in
line with our estimate, driven by in-line sales and higher EBITDA margin at 21% due to
lower R&D expenses. Payments linked to Pfizer Insulin sales in India will remain minimal
in FY2012E, though Biocon will qualify for milestone payments. We increase FY2012E
EPS by 13% reckoning for licensing fees. We raise our price target to Rs470 (from
Rs430) and move to ADD (from BUY). A doubling of R&D expenses is likely to result in
a muted 2HFY11E and we advise investors to use the weakness to buy into the stock.
Oral insulin out-licensing remains a strong trigger in FY2012E.