MOSL: BIOCON (Neutral)-Strong earnings beat on solid traction in biologics
Biocon: Strong earnings beat on solid traction in biologics
(BIOS IN, Mkt Cap USD5.6b, CMP INR665, TP INR685, 3% Upside, Neutral)
- Strong earnings beat: BIOS reported strong revenues, up ~46% YoY to INR15.1b (est. INR14.1b), led by strong growth in Biologics (28% of sales) and Research Services business (30% of sales). Superior product mix led to ~610bp YoY rise in gross margin (GM). EBITDA margin expanded ~560bp YoY (+80bp QoQ) to 26.5% on back of higher gross margin and lower employee cost, down ~280bp (as % of sales). This impact was partially off-set by higher other expense, which was up ~330bp (as % of sales). Absolute EBITDA increased by ~85% YoY (+20% QoQ) to INR4.1b on revenue growth and margin expansion. EBIT margin for the Biologics segment stood at ~30% v/s (-3%) YoY and 25% QoQ. PAT more than doubled to INR2.2b, growing ~136% YoY on back of strong revenue growth, margin expansion, and lower tax rate at 16.7% v/s 25.2% in 3QFY18. Adjusted for forex loss, PAT stood at INR2.4b (v/s est. of INR1.6b). BIOS delivered 35%/66%/109% YoY growth in sales/EBITDA/PAT for 9MFY19.
- Growth across segments drives revenues: BIOS’ biologics sales are up 148% YoY to INR4.4b, led by robust performance across products and markets. Research Services’ sales grew 21% YoY to INR4.7b led by Discovery Chemistry and Biologics. Small molecules grew ~27% YoY to INR4.7b led by robust API sales in emerging markets (EM) and better Generic business in the US market. Branded Formulation (BF) sales grew ~36% YoY to INR2.1b led by superior execution in key markets and partly due to channel filling in the UAE.
- Key concall highlights: (1) The company has responded to the CRL for Lantus and is working on bridging the study to shift manufacturing to Malaysia, (2) BIOS guided R&D spend at INR4.5b for FY19 and at a similar rate for FY20, (3) though BF grew sharply in 3QFY19, BIOS guided mid-teens growth for FY19.
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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