MOSL: BIOCON (Neutral)-On course to revive earnings growth
BIOCON: On course to revive earnings growth
(BIOS IN, Mkt Cap USD5.7b, CMP INR359, TP INR360, Neutral)
We recently met with BIOS’ management to understand its business outlook in greater detail. Here are the key takeaways:
- After two years (FY20/FY21) of earnings decline, BIOS is well-positioned to revive earnings growth meaningfully.
- In addition to steady traction in already launched Biosimilars, BIOS has Insulin Glargine (Semglee) contracts starting 4QFY22. This would be further supported by b-Aspart, subject to regulatory clearance.
- The recent agreement with the Serum Institute of India (SII) to market its COVID-19 vaccine further increases its business prospects from 2HFY23E onwards.
- We expect 36% earnings CAGR over FY21-23E, led by Insulin Glargine, scaling up of the Biologics business in emerging markets, and ramp-up in research services. We are yet to factor in the Vaccine business in our estimates.
- While the earnings outlook remains promising, we maintain our Neutral stance with a TP of INR360 per share (32x 12-month forward earnings) as current valuations factor in an earnings upside over the medium term.
Vaccine - Potential opportunity in the offing
- BIOS has partnered with the SII to market 100m vaccine doses annually for 15 years, to be manufactured by Serum Life Sciences (SILS). The business opportunity is expected to start after the deal's conclusion, likely, in Oct'22
- Considering the rising COVID-19 cases and current global vaccine pricing (USD3-5/dose range), the business potential can be USD300-500m for BIOS. The margin on Vaccines can be in line with its current core EBITDA margin of ~30%.
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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