Biocon - Fundamental Call - Consortium

Q3FY13 result highlights:

Consol. revenues grew 23% yoy to Rs6.3bn led by strong growth across segments - Bio-pharma (+29%), contract research (+25%).

EBITDA was higher yoy Rs1.42bn despite lower licensing income (Rs88m (est Rs180m) vs Rs292m in Q3FY12) and higher R&D spend (Rs430 vs. Rs330m in Q3FY12)

As a result, EBIDTA margins declined to 22.3% (-230bp yoy) for the quarter.

Other income came at Rs253m vs. est of Rs150m; tax rate was higher at 21.4%

PAT grew 8% yoy to Rs917mn, ahead of estimates of Rs876mn.

Valuations & view

Biocon is a unique play on four big opportunities in the global pharma space - diabetes, biosimilars, CRAMS and NCE research, which have the potential to dramatically lift the company's growth trajectory in the coming years. Over the next 12-18 months, potential newsflow is likely on outlicensing of Itolizumab and partnering out of Rh insulin / analogues in EU and other markets. This can generate significant milestone income and improve medium term growth visibility. Strong balance sheet (~Rs7bn net cash) and reasonable valuations (~13x FY14E) add to the comfort. Maintain Outperformer, with price target of Rs310 (15x FY14 EPS).

Source : Equity Bulls

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