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Biocon: High Other Income And Licensing Income Drive Growth - Views on News from Equitymaster
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  • Nov 7, 2016 - Biocon: High Other Income And Licensing Income Drive Growth

Biocon: High Other Income And Licensing Income Drive Growth
Nov 7, 2016

Biocon has announced its 2QFY17. The company has reported 19.8% YoY growth in net sales and profits of Rs 1.5 bn for the quarter. Here is our analysis of the results.

Performance summary
  • Net Sales grows by 19.8% YoY during the quarter, largely driven by both biopharmaceuticals and contract manufacturing segments. On year on year basis, biologics and small molecules businesses, witnessed healthy growth. The domestic branded segment witnessed some pressures owing to, discontinued sales of Abraxane (in-licensed from Celgene) and revision in the pricing of some drugs (NLEM) in India. Biocon reported sharp surge in the licensing income (this income is lumpy in nature). The company reported licensing income of Rs 328m for the quarter vs Rs 16 m in 2QFY16. On the quarterly basis, sales of biologics slipped by 21%, despite launch of Biosimilar Glargine in 1QFY17. However, management indicated, the biologic segment will ramp up over the rest of the year.
  • Operating margins improved by 3.9% for the quarter, largely on the back of high licensing income. It is also imperative to note the R&D expenses reported for the quarter are still much lower than company's guidance of 12%-14% of Biopharmaceuticals.
  • Net profits reported for the quarter were Rs 1.5 bn versus loss of Rs 108 m in 2QFY16. This largely pertains to exceptional costs incurred in 2QFY16. Adjusting to the exceptional loss of Rs 1.07 bn for 2QFY16, the net profits surged by 52% YoY.

    Financial performance: A snapshot
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Net sales 7,852 9,404 19.8% 15,957 19,220 20.4%
    Expenditure 6,270 7,141 13.9% 12,398 14,430 16.4%
    Operating profit (EBDITA) 1,582 2,263 43.0% 3,559 4,790 34.6%
    EBDITA margin (%) 20.1% 24.1% 22.3% 24.9% 11.7%
    Other income 334 -100.0% 641 1,034 61.3%
    Interest (net) 29 65 73 122
    Depreciation 610 683 12.0% 1,201 1,344 11.9%
    Profit before tax 1,277 1,515 18.6% 2,926 4,358 48.9%
    Tax 282 417 47.9% 659 969 47.0%
    Profit after tax/(loss) 995 1,098 10.4% 2,267 3,389 49.5%
    Extraordinary item -1,078 -1,078 100
    Minority Interest 25 152 508.0% 57 256 349.1%
    Net profit after minority int -108 946 1,132 3,133
    Net profit margin (%) 10.1% 16.3%
    No. of shares (m) 200
    Diluted earnings per share (Rs) 31
    Price to earnings ratio (x)* 29.48

    *based on trailing 12 months earnings and adjusted over exceptional item


    Business Mix 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Biopharmaceuticals 4,156 5,178 24.6% 8,900 10,780 21.1%
    (% of consolidated revenues) 53% 55% 56% 56%
    Branded Formulations 1,192 1,366 14.6% 2,314 2,948 27.4%
    (% of consolidated revenues) 15% 15% 15% 15%
    Contract Manufacturing 2,504 2,860 14.2% 4,743 5,492 15.8%
    (% of consolidated revenues) 32% 30% 30% 29%
    Total 7,852 9,404 19.8% 15,957 19,220 20.4%
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