MOSL: BIOCON (Upgrade to Neutral)-Plant disruption impacted performance-early remediation is key
​Biocon: Plant disruption impacted performance; early remediation is key
(BIOS IN, Mkt Cap USD3.6b, CMP INR358, TP INR335, 6% Downside, Upgrade to Neutral)
- BIOS reported weak 2QFY18 results. Revenue declined 2% YoY to INR9.6b (est. of INR10.9b). The muted performance can primarily be ascribed to disruption at the Bangalore facility, pricing pressure in the US and delays in tenders in the emerging market. EBITDA declined 24.1% YoY (-5% QoQ) to INR1.8b (est. of INR2.6b). EBITDA margin came in at 18.8% (-630bp YoY and -176bp QoQ). PAT declined ~53% YoY to INR687m (est. of INR1.4b), primarily due to an increase in depreciation and interest expense relating to the Malaysian facility.
- Uptick in branded formulation biz post GST; expect pick-up in biologics in 2H: Branded formulation business showed a smart recovery, growing 29% YoY, driven by channel restocking in India. Biologics segment was impacted mainly due to plant shutdown. Small molecules biz was impacted by pricing pressure in the US. Syngene business (35% of sales) grew 11% YoY.
- Concall takeaways: 1) Maintains USD1b of total sales guidance for FY19. 2) Small molecule formulation plant in Bangalore has been commissioned. 3) Trastuzumab TAD is for 3rd Dec 2017. 4) Remediation plan at Bangalore facility is almost complete. BIOS is planning to invite European Authority for re-inspection shortly. 5) Copaxone filing expected in FY19. 6) Started construction of antibodies and oral solids dosage plant in Bangalore with capex of USD200m over 3-4 years, which is to be completed in two phases.
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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