Buy Biocon; target of Rs 430: Motilal Oswal

Motilal Oswal's research report on Biocon

Biocon (BIOS) has received ‘Voluntary Action Indicated’ (VAI) status for its Malaysian site. With this, BIOS now has all critical sites for biosimilars under USFDA compliance, improving its business prospects in the US market. Regulatory compliance at the Malaysian site paves the way for commercial opportunities for B-Aspart. We believe the contractual cycle will pose a limited hurdle, as there is currently no biosimilar competition for this product. BIOS has experienced a significant earnings decline over the past two years (a 50% compounded decline over FY22-24), led by a lack of potential approvals for the US market and increased financial leverage. BIOS has implemented considerable remediation measures to overcome regulatory issues over the past two years. With compliance in place for the Biocon Park/Malaysian site, we expect product approvals/launches to boost the company’s growth outlook over the next 2-3 years. We expect a 21% EBITDA CAGR over FY25-27.

Outlook

We re-rate the biologics business to 22x 12M forward EV/EBITDA (from 18x earlier) to factor in regulatory compliance. Accordingly, we arrive at an SOTP-based TP of INR430 (22x EV/EBITDA for the biologics business, 53% stake in Syngene, 14x EV/EBITDA for the generics business). Upgrade to BUY.

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Biocon - 13012025 - moti