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Largecap API Manufacturing Stock Posts 26% Revenue Growth, Buy Stock: Sharekhan

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Sharekhan, a leading brokerage firm has maintained a Buy rating for the stock of Biocon, with a Rs. 340 target price. The company has registered mixed operating performance in Q2 with revenue growing in strong double digits, while higher cost pressures led to a decline in PAT. Revenue grew by 26% y-o-y to Rs. 2,319.7 crore, driven by strong 34% y-o-y growth in the biologics segment, 25.9% y-o-y growth in the research services segment, and 17.5% y-o-y growth in the generic segment.

 

Q2FY23 earnings report

Q2FY23 earnings report

The stock's EBIDTA margin fell by 399 BPS to 20.3%; PAT was down by 10% y-o-y to Rs. 205.7 crore. Consolidation of Viatris and the strategic vaccines alliance with Serum Institute will add to growth of the. Biosimilars business in H2FY2023. Margins might remain lower due to higher R&D cost. The stock is currently trading at 32.9/21.6x its FY2023/FY2024E earnings.

Stock Valuation

Stock Valuation

"We maintain our Buy rating on the stock with a revised target price of Rs. 340. Management sees FY2023 to be a year in which it expects to unlock the potential of several investments it has made. New launches planned or tapping new geographies with existing products and enhanced capacities leveraging partnerships would be the key growth drivers," Sharekhan said.

Generic formulations business growth
 

Generic formulations business growth

The generic formulations business also secured several important approvals for vertically integrated products in the EU and rest of the world, and received five product approvals across key markets. Viatris-led advanced markets business reported strong y-o-y growth on account of improved performance by interchangeable bGlargine (Semglee), which witnessed an uptick of 14% in prescription share and 12% in overall prescription share. The company reported increased uptake of Fulphila in the U.S. with market share surpassing 10%, despite higher competition.

Fresh launches

Fresh launches

Launched two important products, Sitagliptin and Vildagliptin in the EU, enabled by brownfield capacity expansions undertaken at our Bengaluru and Visakhapatnam facilities. The biologics segment's revenue grew by 34% y-o-y, driven by higher sales of its biosimilar insulin and antibodies in advanced and emerging markets. Sygene's revenue grew by 26% y-o-y to Rs. 610 crore. Gross margin expanded by 180 BPS y-o-y due to a favourable mix.

About The stock

About The stock

Established in 1978, Bengaluru-based Biocon is India's premier biotechnology company. Biocon is now a fully integrated biopharma player with API manufacturing facilities, strong capabilities in biologics, innovative drug development, and a branded generics business in India. With over 25 years of expertise in fermentation technology, the company has built a strong presence in lucrative high-growth segments such as statins, immuno-suppressants, and anti-diabetes drugs. Biocon is among the few companies globally to have received approvals for its biosimilars from developed countries such as the US, EU, Australia, and Japan.

Disclaimer

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.

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