A few days ago, we complimented Porinju Veliyath for his brilliant stock pick in Biocon. Porinju homed in on the stock when it was it was lying unwanted. Within a short period, the stock spurted a magnificent 38%.
The best part is that Porinju has confidently asserted that Biocon is presently at an inflection point and has the potential to give 100% gains over the next two years.
— CNBC-TV18 News (@CNBCTV18News) May 27, 2016
However, Daljeet Kohli has trashed Porinju’s analysis. Daljeet is not impressed by the gains that Biocon has notched up. He calls it a “hope trade” on the logic that the Company will take at least two years to deliver numbers and that several variables can change in that period.
His precise words:
“See the numbers are not coming and I do not expect that numbers will come even in FY18 because their actual numbers will start coming up once the Malaysian facility which starts in FY17 will start delivering. So till that time, it is all a hope trade. People do not want to wait till FY18 and they want to just pre-empt everything and put it in the numbers at this time. We should remember one thing, that in pharma especially, the product on which you were banking, two years is a very long time. What happens in those two years and how much competition comes in, whether this is a new product. A bio-similar is something which has not yet been tested anywhere. So they are coming out with the new things. Whether they will be able to take the market share, how it will work, all these things are still not clear. So I think pre-empting all that two years ahead is slightly overbought and so that is why we are against this kind of move. We had a hold rating with the target of Rs 488. Now of course that is almost half of it in current price but we are still not revising the rating, neither the target.”
In addition to Daljeet, CLSA and Motilal Oswal are also pessimistic about Biocon’s prospects. Motilal Oswal also voiced the concern that “big investment projects like the biosimilars/ Malaysia insulin plant are unlikely to generate significant revenue before FY18”.
Now, the big question is whether Porinju has bitten off more than he can chew or whether he will be able to hold his ground against the consensus opinion. Only time will tell!