The Karvy Stock Broking report on Biocon:

Various Factors to sustain the revenue momentum

"On the back of six month exclusivity granted to Pravastatin and Simvastatin we believe the full upside of the Statin upside would be pushed to FY2008E. We believe the company would have Statin revenues of Rs 3 billion in FY2007E which will increase to Rs 3.4 billion in FY 2008E. Contract Research services is expected to scale up from Rs 1.4 billion in FY 2007E to Rs 1.8 billion in FY 2008E on the back of continuous scale up in expansion of space. Continuous revenue momentum in Syngene and renewed traction in Clinigene will enable the company to show the revenue growth momentum. Insulin, Enzymes and Monoclonal Antibodies are also expected to contribute
to the revenue momentum."

Margins expected to be on the upswing

"Scale up in the regulated markets of US coupled with growth in the high margin Monoclonal antibodies segment, Insulin and the Contract Research services should give the company the requisite momentum to increase margins from 29% in FY2006 to 33.6% in FY2008. Savings in materials cost has more than offset the increase in power and personnel costs."

Reasonable valuations and earnings growth make it outperformer

"Biocon is currently quoting at 19x FY2007E (EPS Rs 18.5) and 13.3x FY2008E (EPS Rs 26). With statin supplies commencing from 2nd half, contract research business scaling up, tie up with Bayer for the Chinese Insulin market and announcement of European partnership for Insulins, updates on Oral Insulin progress and further progress on various other indications for the monoclonal antibodies apart from Head and Neck Cancer are the positive events to unfold in the future. We rate the stock as an outperformer with a price target of Rs 415 based on 16x FY 2008E."