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Motilal Oswal Report
Valuation captures upside potential in earnings
BIOS delivered lower-than-expected 4QFY23 operational performance, led by lower traction in biologics (ex-licensing income) and generics business. This was offset to some extent by strong execution in Research services (Syngene) business.
We reduce our earnings estimate by 6%/2% for FY24/FY25 to factor a) in reduction in vaccine business, on account of restructuring of a deal with Serum institute, b) regulatory delays for key approvals (b-aspart/b-bevacizumab), and c) sustained momentum in research services business. We BIOS on an SoTP basis (17x EV/EBITDA for 70% stake in Biocon Biologics (BBL), 54% stake in Syngene, and 10x EV/EBITDA for generics business) to arrive at a price target of INR260.
BIOS is enhancing its business prospects across segments – product pipeline/synergy building with viatris in the biosimilar segment, adding capacity/new launches in the generics segment and healthy demand for research services. However, the current valuation factors in the upside potential in earnings. We reiterate our Neutral stance on the stock.
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