Jefferies downgrades Biocon to ‘underperform’, sees 11% downside; here's why

livemint.com:

Biocon to 'underperform' from 'hold'. However, Jefferies has maintained its target price of ₹250 for the stock, implying an 11 percent downside from its current market price of ₹281.50. "We downgrade Biocon to Underperform from Hold with an unchanged PT of ₹250.

We are 17-19 percent below consensus for FY25-26 and believe earnings downgrades will continue due to a lack of new launches in the biosimilars segment and a weak FY25 outlook for Syngene due to a lack of major manufacturing contract wins. With weak free cash flow (FCF) generation, high leverage will hurt Biocon unless it looks at fundraise options, like stake sale in biosimilars and Syngene," rationaled the brokerage. The stock has gained 24 percent in the last 1 year and over 11 percent in 2024 YTD.

It rose almost 4 percent in February so far, extending gains for the fourth straight month. Before this, it rose 7.4 percent in January 2024, 4.7 percent in December 2023 and 8.5 percent in November 2023. The stock also hit its 52-week high of ₹307 earlier this month on February 6, 2024.

At its CMP, the stock has jumped 47 percent from its 52-week low of ₹191.60, hit on March 21, 2023. In the December quarter, the company reported a consolidated net profit of ₹660 crore on the back of robust sales as against a net loss of ₹42 crore in the October-December period of the last fiscal. Its total revenue also rose almost 50 percent year-on-year (YoY) to ₹4,519 crore in Q3FY24 versus ₹3,020 crore in the year-ago period, while revenue from operations stood at ₹3,954 crore, up 34 percent YoY.