Biocon - March 2013 Results Preview - Motilal Oswal

- We expect Biocon's 4QFY13E top line to grow by a modest 6% YoY to INR6.46b on a high base of 4QFY12. Growth will be driven by (1) 10% growth in biopharma revenue and (2) 22% growth in contract research revenue. Licensing income is likely to decline to INR155m (4QFY12: INR463m).

- EBITDA would decline 13% YoY to INR1.35b as EBITDA margin could shrink 440bp to 21% due to lower licensing income and increased R&D spending on the biogenerics pipeline.

- We expect adjusted PAT to decline 12.5% YoY to INR855m due to base effect and lower operational performance.

The key growth drivers for FY13E/14E will be: 1) traction in company's insulin initiative in emerging markets, 2) ramp-up in contract research business and 3) incremental contribution from immuno-suppressants API supplies. However, given the high cost for developing biogeneric products, we believe cost pressures are likely to continue in FY13E/14E, thus impacting earnings and return ratios. Option values for future include separate listing of CR business and a potential out-licensing of the oral insulin NCE by BMS. The stock is valued at 14.8x FY14E and 12.9x FY15E earnings. Maintain Neutral.

Source : Equity Bulls

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