
Shares of Biocon surged 4% today following an upgrade by Motilal Oswal to a “Buy” rating, with a target price of ₹430. The upgrade reflects improved regulatory visibility, operational advancements, and strong growth prospects in the biosimilars segment.
Motilal Oswal’s optimism stems from Biocon receiving a “Voluntary Action Indicated” (VAI) status for its Malaysian manufacturing facility, which had earlier faced regulatory concerns. The VAI status signifies compliance with USFDA standards, unlocking potential for Biocon’s B-Aspart product in the US market, expected to generate sales of $80–100 million annually.
As of 10:30 am the shares were trading 3.89% higher at ₹375.00 on NSE.
Key Highlights from the Motilal Oswal Report:
- Regulatory Progress and Market Opportunities:
- Biocon’s enhanced compliance at its Malaysian site strengthens the company’s biosimilar pipeline.
- The anticipated approval and commercialization of B-Aspart in the US is a major milestone.
- Regulatory clarity boosts investor confidence, allowing Biocon to focus on its global expansion strategy.
- Growth Projections:
- Motilal Oswal anticipates a robust 21% EBITDA CAGR over FY25-FY27, driven by the scaling of biosimilars and contract research business through Syngene.
- Biocon’s biologics division is poised to achieve a 28% revenue CAGR over the next two years, propelled by increasing market penetration and portfolio expansion.
- Improving Profitability:
- The brokerage notes a strong recovery in gross margins, expected to reach 70% in FY25, supported by better product mix and economies of scale.
- Operating efficiencies and reduced regulatory costs are likely to drive EBITDA margins from 23% in FY25 to 28% by FY27.
- Syngene Contribution:
- Biocon’s 53% stake in Syngene remains a significant value driver, providing a steady revenue stream and supporting overall financial stability.
- Valuation and Risks:
- The revised target price of ₹430 reflects a 20% upside from the current levels.
- Key risks include potential delays in product approvals, pricing pressure in key markets, and execution challenges in meeting regulatory requirements.
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