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P o o r s h o w b y B i o p h a r m a , n e g a t i v e s u r p r i s e …
Biocon’s Q3FY12 results were far below our expectation. The company
posted flat growth of 1% YoY to | 518.5 crore compared to our
expectation of | 597 crore, mainly on the back of lower than anticipated
growth in the biopharmaceuticals business. Biopharma, excluding
licensing income, grew marginally by 6% as against our expectation of
17% on the back of lower production activities. During the quarter, the
company has allocated a part of its production facility to development
programmes. EBITDA margins declined 734 bps to 24.8% YoY below our
expectation of 27.8% on the back of a sharp increase in the raw material
cost and employee cost. The net profit grew by 14% to | 84.9 crore as
against our expectation of | 94.8 crore. We have reduced our target price
in line with revised estimates after accounting for unforeseen delays and
a slowdown in the Biopharma space. We, however, maintain BUY after
considering the recent sharp correction, which we believe is overdone.
ƒ Biopharma ex-licensing income posts 6% growth YoY
Biopharma business excluding licensing income grew marginally by
6% to | 376.3 crore. With recent launches including Insupen device,
branded formulations business grew 49% to | 70 crore.
ƒ R&D services business grows by 42% YoY
Research services business witnessed robust 42% growth to | 111.9
crore on the back of expansion by existing clients and favourable
currency movement. Growth in constant currency was ~32%.
V a l u a t i o n
We have cut our revenue and profitability estimates for FY13E by 7% and
15%, respectively, due to 1) delay in anticipated product launches
through Pfizer deal in emerging markets and 2) slower offtake of
Fidaxomicin API. Lumpiness of licensing income and its reporting is also
adding to our concerns. Although positive news from Itolizumab studies
holds promise, we will have to wait for the possible commercialisation
deal. We have valued the stock at | 366 i.e.18x FY13E revised EPS of |
20.4
EBITDA margins fell by 734 bps
EBITDA margins declined 734 bps to 24.8% YoY below our expectation of
27.8% on the back of a sharp increase in the raw material cost and
employee cost. The raw material cost as percentage of revenues
increased by 410 bps to 40.2% on the back of lower production activities
during the quarter. With increase in employees in both the R&D and
manufacturing space, the employee cost increased 320 bps to 15.3%.
However, R&D cost during the quarter stood at | 33 crore compared to |
55 crore in the corresponding previous period. Lower production
activities coupled with lower licensing income led EBITDA to decline by
21.6% to | 128.7 crore as against our expectation of |166 crore.
Net profit up 14% YoY
Other income during the quarter was higher by 93.6% to | 13.7 crore on
the back of forex gain of | 4 crore during the quarter. Interest cost also
declined by 54% to | 2.9 crore. Lower taxation further restricted degrowth in net profit to 14% at | 84.9 crore.
V a l u a t i o n
Despite some new launches, favourable currency and supply of much
talked Fidaxomicin API to Optimer, the biopharma business remained flat,
thanks to lumpy licensing income and spikes in production activity to
facilitate development activity.
We expect sales and profits (after adjusting Axicorp number in FY11) to
grow 18% and 11%, respectively between FY11 and FY13E. We have cut
our revenues and profitability for FY13E by 7% and 15%, respectively,
due to 1) delay in anticipated product launches through Pfizer deal in
emerging markets and 2) slower off-take of Fidaxomicin API. Lumpiness
of licensing income and its reporting is also adding to our concerns.
Although positive news from Itolizumab studies holds promise, we will
have to wait for a possible commercialisation deal. We have valued the
stock at | 366 i.e.18x FY13E revised EPS of | 20.4. We also recommend
that investors who bought the stock at the time of our earlier
recommendations hold on to the same.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P o o r s h o w b y B i o p h a r m a , n e g a t i v e s u r p r i s e …
Biocon’s Q3FY12 results were far below our expectation. The company
posted flat growth of 1% YoY to | 518.5 crore compared to our
expectation of | 597 crore, mainly on the back of lower than anticipated
growth in the biopharmaceuticals business. Biopharma, excluding
licensing income, grew marginally by 6% as against our expectation of
17% on the back of lower production activities. During the quarter, the
company has allocated a part of its production facility to development
programmes. EBITDA margins declined 734 bps to 24.8% YoY below our
expectation of 27.8% on the back of a sharp increase in the raw material
cost and employee cost. The net profit grew by 14% to | 84.9 crore as
against our expectation of | 94.8 crore. We have reduced our target price
in line with revised estimates after accounting for unforeseen delays and
a slowdown in the Biopharma space. We, however, maintain BUY after
considering the recent sharp correction, which we believe is overdone.
ƒ Biopharma ex-licensing income posts 6% growth YoY
Biopharma business excluding licensing income grew marginally by
6% to | 376.3 crore. With recent launches including Insupen device,
branded formulations business grew 49% to | 70 crore.
ƒ R&D services business grows by 42% YoY
Research services business witnessed robust 42% growth to | 111.9
crore on the back of expansion by existing clients and favourable
currency movement. Growth in constant currency was ~32%.
V a l u a t i o n
We have cut our revenue and profitability estimates for FY13E by 7% and
15%, respectively, due to 1) delay in anticipated product launches
through Pfizer deal in emerging markets and 2) slower offtake of
Fidaxomicin API. Lumpiness of licensing income and its reporting is also
adding to our concerns. Although positive news from Itolizumab studies
holds promise, we will have to wait for the possible commercialisation
deal. We have valued the stock at | 366 i.e.18x FY13E revised EPS of |
20.4
EBITDA margins fell by 734 bps
EBITDA margins declined 734 bps to 24.8% YoY below our expectation of
27.8% on the back of a sharp increase in the raw material cost and
employee cost. The raw material cost as percentage of revenues
increased by 410 bps to 40.2% on the back of lower production activities
during the quarter. With increase in employees in both the R&D and
manufacturing space, the employee cost increased 320 bps to 15.3%.
However, R&D cost during the quarter stood at | 33 crore compared to |
55 crore in the corresponding previous period. Lower production
activities coupled with lower licensing income led EBITDA to decline by
21.6% to | 128.7 crore as against our expectation of |166 crore.
Net profit up 14% YoY
Other income during the quarter was higher by 93.6% to | 13.7 crore on
the back of forex gain of | 4 crore during the quarter. Interest cost also
declined by 54% to | 2.9 crore. Lower taxation further restricted degrowth in net profit to 14% at | 84.9 crore.
V a l u a t i o n
Despite some new launches, favourable currency and supply of much
talked Fidaxomicin API to Optimer, the biopharma business remained flat,
thanks to lumpy licensing income and spikes in production activity to
facilitate development activity.
We expect sales and profits (after adjusting Axicorp number in FY11) to
grow 18% and 11%, respectively between FY11 and FY13E. We have cut
our revenues and profitability for FY13E by 7% and 15%, respectively,
due to 1) delay in anticipated product launches through Pfizer deal in
emerging markets and 2) slower off-take of Fidaxomicin API. Lumpiness
of licensing income and its reporting is also adding to our concerns.
Although positive news from Itolizumab studies holds promise, we will
have to wait for a possible commercialisation deal. We have valued the
stock at | 366 i.e.18x FY13E revised EPS of | 20.4. We also recommend
that investors who bought the stock at the time of our earlier
recommendations hold on to the same.
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