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  • 21 Jan 2022
  • ICICIdirect Research

BIOCON REVENUES A BEAT, MARGINS REMAIN UNDER PRESSURE

BIOCON - 366 Change: -2.05 (-0.56 %)

News: Revenues grew 17.5% YoY to Rs.2174.2 crore (I-direct estimate: Rs.2079.5 crore). Biosimilars grew 27.6% YoY to | 981.4 crore, better than I-direct estimates of Rs.859.5 crore on back of robust demand across geographies and commencement of supplies of interchangeable bGlargine in US. Research Services segment grew 9.7% YoY at Rs. 641.4 crore, above I-direct estimates of Rs.631.3 crore mainly due to growth in Discovery Services and Dedicated Centres while Generic sales increased 7.1% YoY to Rs.607.4 crore (I-direct estimate: Rs.588.7 crore) driven by US launch of Everolimus Tablets and ramp-up of demand in API business. EBITDA margins were lower than our estimates amid a 87 bps YoY improvement to 22.5% (I-direct estimate: 24.7%) mainly due to decline in gross margin (down 254 bps YoY) at 67.2% and higher other expenditure being offset by lower employee cost and R&D expenditure. Overall EBITDA improved 22.2% YoY to Rs.488.2 crore as against I-direct estimate of Rs.513.7 crore. Adjusted PAT grew 11% YoY to Rs.187.1 crore (I-direct estimate: Rs.165.8 crore). Delta vis-a vis EBITDA was on account of higher interest cost being partially offset by lower tax and higher other income.

Views: Biocon's Q3FY22 revenues were above estimates while margins were a miss. Revenue growth was driven by strong performance across all segments while margin profile was lower than expected due to increase in input cost and higher other expenditure. In Generics, Covid related disruptions subsided in business operations, but Biocon continues to face pricing pressure and higher raw material and logistic cost. Timely launches and ramp up of Biosimilars in the developed as well as emerging markets and Syngene’s performances remain key levers for the company. We will come out with an update post discussion with the management.

Impact: Positive