'Buy' Biocon Shares Maintains Motilal Oswal Despite EPS Dilution; Sees Upto 20% Upside

Motilal Oswal maintains its Buy rating on Biocon, highlighting that while near-term stock performance may face pressure due to dilution and fund-raising, medium-term fundamentals remain robust with expected revenue CAGR of ~15% and EPS CAGR of 84% over FY25–28.

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Motilal Oswal Report

Biocon Ltd. is fully integrating Biocon Biologics by acquiring the remaining stake of 23.3%. In addition to the share swap, Biocon is raising additional capital through a QIP of up to Rs 45 billion, subject to shareholder approval, for the cash component payable to Viatris.

The deal will eliminate the minority interest as Biocon Biologics will become a wholly owned subsidiary of Biocon. However, the addition of equity shares would result in EPS dilution.

Accordingly, Motilal Oswal trims its earnings estimates by 9%/8% for FY27/FY28.

The brokerage values Biocon on SOTP basis (22x 12M fwd EV/Ebitda for biologics business, 53% stake in Syngene, and 10x EV/Ebitda for generics business) to arrive at a target price of Rs 460.

While the equity dilution and QIP process may create a near-term drag on stock price, business prospects remain encouraging on the back of-

1. product launches (namely insulin aspart) in biologics segment and subsequent market share gain,

2. scale-up of generics business, and

3. growth/operating leverage in Syngene business.

Maintain Buy.

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