Biocon: Should you buy the stock after Q2 results? Here’s what brokerages say

Following the announcement of Biocon's Q2FY24 performance, domestic brokerage firms remain divided on the stock as the company's numbers came in below their projections.

In Q2FY24, the company's revenue reached ₹3,462 crore, indicating a 49% increase compared to the Q2FY23 revenue of ₹2,320 crore. However, on a quarter-on-quarter (QoQ) basis, it remained flat. The biosimilars segment contributed to this growth, with a 97% YoY increase to ₹1,969 crore in Q2 FY24. Nevertheless, it fell short of analysts' estimates.

The generics business reported 4% YoY growth, reaching ₹676 crore. The net profit of the company showed significant improvement, rising by 111% YoY to ₹173 crore.

Motilal Oswal: 'Neutral'

The brokerage maintained its 'Neutral' rating on the stock with a target price of ₹220 apiece, valuing the stock on a SOTP basis (15x EV/EBITDA for 70% stake in Biocon Biologics (BBL), 54% stake in Syngene, and 10x EV/EBITDA for generics business).

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"Biocon continues to enhance its outlook across key segments. However, the implementation of remediation measures at biosimilar sites, the slow ramp-up in capacity utilization for Syngene plants, and the gestation period associated with investments in the generics segment are currently limiting the outlook for the next 12–24 months. Also, given the limited upside from its current levels, the brokerage reiterated its 'neutral' stance on the stock," said the brokerage. 

Kotak Institutional Equities: 'Reduce'

The brokerage maintained its cautious view on BIOS execution in its core biosimilars business. Elevated net debt (excluding structured investments) at US $1.2 billion remains a concern, it noted. 

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"We lower our FY2024–26E EBITDA by 4–10% as we factor in lower sales across biosimilars (particularly Aspart and Adalimumab) and generics. Roll forward to September 2025E to derive a SoTP-based target price of ₹235 ( ₹240 earlier), maintaining a 'Reduce' rating," said Kotak Institutional.

JM Financial: 'Buy'

The brokerage, on the other hand, maintained its 'buy' rating on the stock with a target price of ₹340 apiece.

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"Over the next 2-3 quarters, we expect healthy growth in existing biosimilars with formulary additions and some recovery in generics. A positive outcome for Aflibercept and Aspart/Beva approval could bolster street confidence, in our view."

"We adjust our earnings to factor in lower guidance for the Syngene and generics businesses. We continue to believe that as key levers play out over the next 2–3 years, the stock can re-rate significantly," JM Financial said.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.