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Biocon’s Q2FY12 results (after adjusting Axicorp in Q2FY11) were marginally above our estimates and we continue to maintain Hold rating. The topline grew by 22% y-o-y which was above our estimates due to higher than expected growth in branded formulation business during the quarter. EBIDTA showed lower growth of 6% y-o-y at ` 1385mln on account of booking of development cost on licensing income during the quarter and EBIDTA margins fell by 400 bps y-o-y. Higher tax rate impacted PAT which showed degrowth of 4% y-o-y to ` 857mln.
Branded formulations business led Biopharma growth
Biopharma business (excluding licensing income) grew by 18% y-o-y & 15% y-o-y in Q2FY12 & H1FY12 respectively on the back of strong growth across all segments including Statins, Immunosuppressants and Insulins. Branded formulation business posted strong growth of 30% y-o-y & 39% in Q2FY12 & H1FY12 respectively which was driven by all therapy segments. Further, Biocon launched reusable insulin delivery device INSUPen in October 2011 which we believe will help branded formulation segment to post strong growth in coming quarters too. Management expects its domestic branded formulations business to contribute 20%-25% to its overall sales in next 3-5 years as against 10.7% in FY11.
Biocon commenced Fidaxomicin API supply to Optimer during last quarter which has seen better-than-expected off-take in sales and we believe it will start contributing significantly from FY13 onwards. Biocon is the sole supplier to Optimer and it is focusing on improving operational efficiencies to meet the increased demand.
Research (CRO) services continues to perform
Research services business performance was robust during the quarter and grew by 19% y-o-y & 20% y-o-y in Q2FY12 & H1FY12 respectively. We believe that restructuring done in Syngene in FY11 is now paying rich dividend. Syngene has changed its business model from fee based to risk-reward based and has also become an integrated player. Clinigene is focusing more on pre-clinical studies and Phase I studies. We believe that Clinigene’s growth will be subdued but Syngene should drive sales growth for the CRO business.
Valuation
We have valued Biocon on SOTP basis with Biopharma business valued at ` 225/share, CRO business valued at ` 51/share, R&D pipeline to be worth ` 23/share, Fidaxomicin API supply to be worth ` 9/share and Licensing income from Pfizer to be worth ` 53/share to arrive at a Target Price of ` 361. At CMP of ` 347 the stock is trading at 16.2XFY13P. We maintain Hold rating with a target price of ` 361.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Biocon’s Q2FY12 results (after adjusting Axicorp in Q2FY11) were marginally above our estimates and we continue to maintain Hold rating. The topline grew by 22% y-o-y which was above our estimates due to higher than expected growth in branded formulation business during the quarter. EBIDTA showed lower growth of 6% y-o-y at ` 1385mln on account of booking of development cost on licensing income during the quarter and EBIDTA margins fell by 400 bps y-o-y. Higher tax rate impacted PAT which showed degrowth of 4% y-o-y to ` 857mln.
Branded formulations business led Biopharma growth
Biopharma business (excluding licensing income) grew by 18% y-o-y & 15% y-o-y in Q2FY12 & H1FY12 respectively on the back of strong growth across all segments including Statins, Immunosuppressants and Insulins. Branded formulation business posted strong growth of 30% y-o-y & 39% in Q2FY12 & H1FY12 respectively which was driven by all therapy segments. Further, Biocon launched reusable insulin delivery device INSUPen in October 2011 which we believe will help branded formulation segment to post strong growth in coming quarters too. Management expects its domestic branded formulations business to contribute 20%-25% to its overall sales in next 3-5 years as against 10.7% in FY11.
Biocon commenced Fidaxomicin API supply to Optimer during last quarter which has seen better-than-expected off-take in sales and we believe it will start contributing significantly from FY13 onwards. Biocon is the sole supplier to Optimer and it is focusing on improving operational efficiencies to meet the increased demand.
Research (CRO) services continues to perform
Research services business performance was robust during the quarter and grew by 19% y-o-y & 20% y-o-y in Q2FY12 & H1FY12 respectively. We believe that restructuring done in Syngene in FY11 is now paying rich dividend. Syngene has changed its business model from fee based to risk-reward based and has also become an integrated player. Clinigene is focusing more on pre-clinical studies and Phase I studies. We believe that Clinigene’s growth will be subdued but Syngene should drive sales growth for the CRO business.
Valuation
We have valued Biocon on SOTP basis with Biopharma business valued at ` 225/share, CRO business valued at ` 51/share, R&D pipeline to be worth ` 23/share, Fidaxomicin API supply to be worth ` 9/share and Licensing income from Pfizer to be worth ` 53/share to arrive at a Target Price of ` 361. At CMP of ` 347 the stock is trading at 16.2XFY13P. We maintain Hold rating with a target price of ` 361.
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