Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter

Biocon has announced its 4QFY17 results. The company has reported 2.7% YoY decline in net sales and net profits of Rs 1.27 billion for the quarter. Here is our analysis of the results.

Performance summary

• Net Sales declined by 61.7% YoY during the quarter, due to exceptional items worth 2.6 billion recorded in the previous year. On a year on year basis, Biocon's Branded Formulations business witnessed growth of 25%. This was due to accounting standards adopted from April last year. On a like-to-like basis, the segment growth was flat.
• Operating margins declined slightly by 130 basis points for the quarter, largely on the back of forex losses. Biocon booked a forex loss of 170 million excluding which operating margins were similar to last year.
• Net profits reported for the quarter were Rs 1.27 billion versus Rs 3.3 billion in 4QFY16. This largely pertains to exceptional income worth 2.6 billion recorded in 4QFY16.
• Tax rate appears lower due to recognition of deferred tax and MAT credit entitlement for the whole year in this quarter.
  
  

  Financial performance: A snapshot

  (Rs m)	4QFY16	4QFY17	Change	FY16	FY17	Change
  Net sales	9,567	9,311	-2.7%	33,810	39,216	16.0%
  Other operating income	0	0		0	0
  Expenditure	7,521	7,436	-1.1%	26,132	29,421	12.6%
  Operating profit (EBDITA)	2,046	1,875	-8.4%	7,678	9,795	27.6%
  EBDITA margin (%)	21.4%	20.1%		22.7%	25.0%
  Other income	160.0	432.0	170.0%	792	1,571	98.4%
  Interest (net)	205.0	50.0	-75.6%	293	260	-11.3%
  Depreciation	648.0	725.0	11.9%	2,487	2,772	11.5%
  Profit before tax	1,353	1,532	13.2%	5,690	8,334	46.5%
  Share of Profit of Joint Venture	53	55		217	163
  Exceptional Items	2,684	0		1,606	0
  Tax	546	103	-81.1%	1,422	1,616	13.6%
  Minority Interest	214	209		587	760
  Profit after tax/(loss)	3,330	1,275	-61.7%	5,504	6,121	11.2%
  Net profit margin (%)	34.8%	13.7%		16.3%	15.6%
  No. of shares (m)	600	600		600	600
  Diluted earnings per share (Rs)				9.2	10.2
  Price to earnings ratio (x)*					32.5

  *based on trailing 12 months earnings

  
  

  Business Mix	4QFY16	4QFY17	Change	FY16	FY17	Change
  Biopharmaceuticals	5,587	5,581	-0.1%	19,879	23,423	17.8%
  (% of consolidated revenues)	58%	60%		59%	60%
  Branded Formulations	1,049	1,310	24.9%	4,409	5,489	24.5%
  (% of consolidated revenues)	11%	14%		13%	14%
  Contract Manufacturing	3,315	2,828	-14.7%	11,070	11,925	7.7%
  (% of consolidated revenues)	35%	30%		33%	30%
  Less: Inter-segment Revenue	384	408		1,548	1,621
  Total	9,567	9,311	-2.7%	33,810	39,216	16.0%