Biocon

Biocon has signed a joint development and commercialisation agreement with Amylin, a USbased biopharmaceutical company for the development of a novel peptide hybrid. As part of this deal while Amylin would provide the technology, Biocon will lead the development and manufacturing. After the biogenerics partnership with Mylan, this deal is yet another affirmation of Biocon’s strong capabilities in the biotechnology arena, and diabetes in particular, as also its ability to partner with global players.

Biocon is a unique play on four big opportunities in the global pharma space – diabetes, biogenerics, CRAMS and NCE research – which can dramatically lift Biocon’s growth trajectory in the coming years, if executed well. Despite recent outperformance, reiterate outperformer with a price target of Rs 250 (16x FY11E). Biocon may close fairly substantial outlicencing deals over the next 12-24 months as it seeks to outlicence Insulin, Glargine as well as other biogeneric products.

This can provide significant upside to estimates. Although there are limited near term triggers, there are possibilities that have significant scope to unlock over a period of time. While most of these opportunities are likely to have limited financial impact in the near term earnings, the brokerage is positive on the value creating potential of Biocon’s product portfolio.

Stock Views on Varun Shipping, Biocon, Cadila Healthcare, Great Offshore

Karvy on Varun Shipping - Target of Rs 61

Karvy Stock Broking has maintained its buy rating on Varun Shipping Company with a target price of Rs 61 in its research report.

"The timely exit from drybulk segment in FY08 where freight rates have fallen by 85% since May 2008 and entry into promising deepwater support servicessegment by acquiring high end anchor handling tugs (AHTS) are expected to help the company to grow operating profits in current turbulent time in shipping. The Company has significantly reduced cyclicality associated with the shipping industry with selection of low risk assets and building diversified fleet across three segments viz. the Liquefied Petroleum Gas i.e. LPG, crude and offshore."

"We expect consolidated revenue to increase by 2.2% to Rs 9.69 billion in FY10 and by 12.4% to Rs 10.9 billion in FY11 and net profit to decline by 10.7% to Rs 1.25 billion in FY10 and increase by 42.2% to Rs 1.77 billion in FY11. We maintain our valuation at 30% discount to NAV with target price of Rs 61 and maintain Buy rating," says Karvy Stock Broking's research report.

IIFL on Biocon - Target of Rs 181

IIFL has maintained its buy rating on Biocon with a price target to Rs 181 in its research report.

"Our recent meeting with Biocon’s management persuades us that the company is stable and growing, notwithstanding the large forex losses that it suffered in FY09 and those that we believe it will continue to suffer to a lower extent for 3-5 years. The biosimilar insulin opportunity in the regulated markets could provide significant upside over the next 3-4 years. The company plans to launch biosimilar insulin in Europe in 1HCY11 and its big pharma partner is making headway towards a launch in the US. Earnings in 4QFY09 will again likely be weighed down by a large forex item, but such losses would be significantly lower thereafter. The stock’s current valuation a PE of 9x on core FY10ii earnings is attractive, in our view. We maintain BUY and raise our price target to Rs 181," says IIFL's research report.

Sharekhan on Cadila Healthcare - Target of Rs 372

Sharekhan has maintained its buy rating on Cadila Healthcare with a price target of Rs 372 in its research report.

"Zydus Cadila (Zydus) has signed a new collaborative drug discovery and development deal with US-based Eli Lilly to develop drugs focusing on the area of cardiovascular diseases. As per its earlier deals with Piramal Healthcare, Jubilant Organosys and Suven Life sciences, Eli Lilly has adopted a similar approach and will pay Zydus for finding new drug candidates and taking them to mid-stage trials, at which point Eli Lilly will have the option to step in and licence the most promising therapies."

"We maintain our positive stance on Zydus, given the strong traction across its business segments. The strong traction in the domestic and the US businesses, and the increasing visibility of the business from the Hospira joint venture reinforce our view on Zydus’ continued growth prospects. We reiterate our Buy recommendation on Zydus with a price target of Rs 372," says Sharekhan's research report.

Reliance Money views on Chennai Petroleum, Elder Pharma, Biocon

Chennai Petroleum - Target Rs 175

Reliance Money has upgraded its rating on Chennai Petroleum Corporation from hold to buy with a target price of Rs 175 in its October 23, 2008 research report. "As expected, Chennai Petroleum has posted disappointing Q2 FY09 results, thanks to lower Gross Refining Margins, huge inventory losses, and one month maintenance shut down during the last quarter. Although the outlook on refining margins is not great, still at current levels, stock is extremely cheap."

"The company also has a strong track record of declaring dividends, and the average dividend yield for the past 15 years is at around 6%, giving a good support to stock price on the downside. Keeping in view the fact that CPCL is the cheapest refinery stock available coupled with attractive dividend track record, we upgrade the stock from HOLD to BUY with a target price of Rs 175 based on 3x FY10 EV/EBITDA multiple," says Reliance Money's research report.

Elder Pharma - Target Rs 338

Reliance Money has maintained its buy rating on Elder Pharmaceuticals with a revised target price of Rs 338 in its October 23, 2008 research report. "With the lower than expected performance in H1FY09 and sharp correction in the valuations across the sector, we revise down the valuation for Elder. We have changed the valuation model from DCF basede earlier to PE multiple based. Hence, we value Elder Pharma at Rs 338 (i.e 6x its FY10 EPS) from earlier DCF based target of Rs 509 per share."

"Though we have revised down our target price to Rs 338 mainly to capture overall market valuations, we maintain our positive stance on the future earnings backed by increased shifting of manufacturing to excise free zones and consistent brand building efforts of the company. Hence, we maintain our BUY recommendation on Elder with the revised target price of Rs 338," says Reliance Money's research report.

Biocon - Target Rs 167

Reliance Money has maintained its buy rating on Biocon with a revised target price of Rs 167 in its October 24, 2008 research report. "Biocon reported 58% growth in its consolidated revenues to Rs 4422.9 million in Q2FY09, coupled with OPM of 16.6% (a sharp fall from 28.8%) and resulted in a flat PBT at Rs 557.1 million. Though we have revised down our target price to Rs 167 mainly to capture overall market valuations, we maintain our positive stance on the future earnings backed by strong pipeline of biosimilars and progress in its discovery pipeline. Hence, we maintain our buy recommendation on Biocon with the revised target price of Rs 167," says Reliance Money's research report.