MOSL: BIOCON (Sell)-Malaysian plant commercialization impacts profits
​Biocon: Malaysian plant commercialization impacts profits
(BIOS IN, Mkt Cap USD3.6b, CMP INR390, TP INR330, 15% Downside, Sell)
- Biocon (BIOS) reported weak 1QFY18 results. Revenue declined 5% YoY to INR9.3b (est. of INR10b), mainly due to weak performance in the Small molecules (-17% YoY) and Branded formulations (-13% YoY) segments. With commercialization of the Malaysian plant, operational expense and fixed cost (depreciation and interest cost) increased ~USD12m, leading to a 27% YoY decline in EBITDA to INR1.9b (est. of INR2.3b). Margin for the quarter came in at 20.6% (-530bp YoY), with employee expenses up ~400bp YoY (as % of sales).
- Branded business impacted by GST; Syngene showing signs of recovery: Small molecules sales declined 17% YoY due to pricing pressure. Branded formulations sales fell 13% YoY due to destocking in trade channels ahead of GST implementation. BIOS, however, expects growth to bounce back in 2Q. The company has guided for mid-to-high-teens growth in India business in the coming quarters. Biologics business grew 15% YoY in 1Q. Syngene business (~29% of revenue) grew 6% YoY.
- Concall takeaways: 1) Maintained USD200m of revenue guidance from Biologics in FY19E; substantial portion will come from EMs. 2) Tender business from the Malaysian plant is worth USD20m annualized (USD5m in 1Q). 3) Peg Filgrastim TAD is 9th Oct. 4) Malaysian facility was inspected by EU regulator in Mar/Apr-17. Observations were issued, and Biocon has replied to it. 5) Syngene signed a multi-year agreement with Japanese manufacturer to produce a novel drug.
Biocon is an Indian biopharmaceutical company. Through its subsidiaries, Co. manufactures biotechnology products and is engaged in research and development in biotechnology. Co. provides a range of products from fermentation derived small molecules to recombinant proteins and antibodies. It has developed and taken a range of novel biologics, biosimilars, differentiated small molecules and recombinant human insulin and analogs from 'Lab to Market'. In research services, Co., through Syngene International Limited, is engaged in the business of custom research in drug discovery while the other subsidiary Clinigene International Limited (Clinigene) is engaged in clinical development.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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