Buy Biocon - FY12 EPS downgrade - Motilal Oswal

BIOCON 3QFY11: Above est; Biopharma drives topline; Licensing income boosts PAT; 5% FY12 EPS downgrade; Buy

Biocon's 3QFY11 performance was above estimates with revenue growth of 14.6% YoY to Rs7.28b (vs est Rs7.37b) and PAT growth of 24% YoY to Rs1b.

Topline growth was led by 22% YoY growth in Biopharma revenues to Rs3.5b on the back of higher supplies of Tacrolimus and Atorvastatin.

Licensing income at Rs768m grew 3.4x YoY led by booking of licensing income from the recently signed deal with Pfizer.

Contract research revenues grew 14% YoY to Rs788m. EBITDA grew 33%YoY to Rs1.68b while EBITDA margins expanded by 300bpYoY to 23%.

PAT was above our estimates at Rs1b (vs est Rs908m) mainly due to higher licensing income.

Key growth drivers for FY11/12 will be: 1) Traction in the company's Insulin initiative and Pfizer contract in emerging markets, 2) Ramp-up in contract research business, and 3) Incremental contribution from immuno-suppressants API supplies. We have cut our EPS estimates for FY12E by 5%. The stock is currently valued at 21.4x FY11E, 19x FY12E and 17.1x FY13E earnings. Maintain Buy with target price of Rs440 (18x FY13E EPS + Rs49/sh DCF value of Pfizer deal).

Source : Equity Bulls

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