Sanofi India Ltd. share price target

Sanofi’s Q2CY23 result was boosted by solid traction in exports (up 30% YoY and ~25% of Q2 revenue), while domestic business took a back seat. Mandated price cuts of ~25% in Lantus (~25% of India sales) and other products under NLEM (15% of portfolio) may have dragged India growth by ~6% YoY, in our view.

Sanofi India’s (SANL) Q3CY22 performance was below our estimates. Revenues declined 8.3% YoY to Rs6.9bn (I-Sec: Rs.7.7bn) due to weak performance in key brands.

Abbott India is one of the fastest growing listed MNC pharma companies in women's health, GI, metabolic, pain, CNS among others. We continue to believe in Abbott's strong growth track in power brands and capability in...

Sanofi India Limited (SANL) hosted an investor call to discuss the results for Q4CY21 and CY21. We have summarised the highlights below

Abbott India is one of the fastest growing listed MNC pharma companies. It has outperformed the industry on a consistent basis in women's health, GI, metabolic, pain, CNS among others. We continue to believe in Abbott's...

Despite Covid-19, the company posted a decent 9MCY20 operational performance with EBITDA growing 12.1% YoY to | 546 crore mainly on the back of reduced other expenses (down 21% YoY) likely stemming from cost rationalisation, reduced marketing & promotional spends. Going ahead, we expect marketing spends to be lower than their historical trends on the back of higher adoption of digital marketing tools amid Covid-19. Sanofi remains one of the fastest growing companies in India in anti-diabetic therapy. It launched Toujeo within just three years of its launch in the US, which...

Higher Share of Chronic, which provides a stable stream of revenues coupled with sustained traction from the top brands and margin expansion, due to favorable mix, to lead to double digit earnings growth over CY2019-CY2022E. Better growth prospects, low exposure to regulated markets, strong balance sheet, healthy cashflows, would continue to support premium valuations. Sanofi India (Sanofi), reported mixed performance for the quarter. Though the numbers are not comparable with the previous quarters as the company had hived off its Ankleshwar facility. The revenues for the quarter declined 11.9% y-o-y to Rs 687 crore...

Despite Covid-19, the company posted a decent H1CY20 operational performance with EBITDA growing 13.6% YoY to | 354 crore mainly on the back of reduced other expenses (down 349 bps YoY) likely stemming from cost rationalisation, reduced marketing & promotional spends. Going ahead, we expect marketing spends to be lower than their historical trends on the back of higher adoption of digital marketing tools amid Covid-19. Sanofi remains one of the fastest growing companies in India in anti-diabetic therapy. It launched Toujeo within just three years of its launch in the US,...

On the business front, despite the nationwide lockdown, domestic growth is expected to remain more or less stable. Exports growth, barring for one or two months due to congestion in all major ports globally, is also expected to remain strong due to 1) currency benefit, 2) slowdown in competition due to delay in new approvals that will be beneficial for existing players and 3) expected demand continuum across the world despite Covid-19. Some windfall is also expected in some critical productsa case in point is Hydroxychloroquine, a malaria drug that is likely to be repurposed as a prophylaxis for Covid-19 treatment in some cases....

Power brands continue to grow ahead of industry growth The domestic pharma market (~| 1.4 trillion AIOCD MAT December 2019) is growing at 9-10% YoY. Branded generics dominate the pharmaceuticals market, constituting nearly 80% of market share in revenue terms. Sanofi's top five brands (Lantus, Combiflam, Allegra, Amaryl and Clexane) together posted revenue CAGR of ~14% (CY15-19), leading their combined contribution to Sanofi's India sales to grow from 44% in December 2015 to nearly 54% in December 2019. Note that four core brands (Lantus, Amaryl,...

Although the deal prima facie looks unfavourable at 0.56x of EV/sales (| 262 crore realisation for a revenue of | 470 crore (17% of overall revenues), we expect a positive rub-off on the margins front, going ahead. As per the management's own assertion, the deal will lead to extended focus on its core branded formulations business that typically fetches better margins vis-vis third party exports. Despite this deal, the overall thesis for Sanofi remains unaltered as one of the fastest growing companies in India in antidiabetic therapy. It has launched Toujeo within just three years of its launch in the US, which suggests that it is prepared to launch core innovative products in India, banking on growth prospects in the anti-diabetic category....

Moderate revenue growth and inferior product mix lead PAT decline: Sales grew 9.4% YoY to INR7.5b (our est. INR7.7b) in 2QCY19. Gross margin (GM) shrank 600bp YoY to 54% due to change in the product mix and high inventory. Compared to GM, EBITDA margin contracted at a lower rate of 300bp YoY to 21.1% (our est. 21.7%) due to controlled other operating expense (down 310bp YoY as % of sales). Lower margins led EBITDA to...

Sanofi's Q1CY19 result came marginally better than our estimates, mainly on EBIDTA front which came 11% higher than our estimates. The EBIDTA margin remained flat YoY but improved 250bps sequentially on the back of lower overhead costs and marginal decline in RM. The management indicates the cost pressure on raw material is gradually subsiding. However, we expect the growth to moderate in CY19 for three reasons (a) CY18 included a small portion of non-recurring revenue from exports, (b) ~40% of exports business which have been transferred to Advent will see a limited scope of expansion, and (c) a few line extensions of legacy products have been covered under NLEM (eg. Amryl MV), thus affecting...

However, EBITDA margin contracted at a much lower rate of 30bp YoY to 21.4% (our of sales) and employee cost (-110bp YoY to 14.4%). Absolute EBITDA largely driven by the Anti-Diabetic (~23% of sales) portfolio, particularly by its top brand (rank-1) Lantus (+24% YoY). According to the AIOCD, secondary sales growth in Anti-Diabetic stood at 24% YoY for the quarter. Notably, the top vaccines brand Hexaxim (rank 5) was down 16% YoY, while the top respiratory brand Avil (rank 8) was down 23% YoY. We cut our CY19/20 earnings estimates by 5%/4.5% to factor in the lower gross margin and the higher tax rate. We roll our target price to a 12-month forward earnings basis and continue valuing rating on the stock, given (1) good prospects in the chronic categories like cardiac, respiratory, diabetes, (2) volume rather than pricing led growth and (3) industry outperformance by the top brands, despite a high base.

Sanofi's Q4CY18 results came marginally below consensus expectations. The Q4 results were affected by spike in raw material and overhead costs, resulting in gross/ EBIDTA margins contracted by 230bps/115bps YoY to 56.9%/18.9%. The revenue growth of 8.4% in Q4CY18 reflects an underperformance in the market (vs. IPM growth of 9.5%) . However, as the Jan2019 AIOCD- AWACS data shows a strong pickup in sales of Sanofi's products (~18% YoY growth Jan-19), we expect subsequent quarters to be stronger. The revenue and net profits grew by 12.5% and Rs16.2% respectively in CY18. We expect Sanofi's sales/EBITDA/net profit to grow by 10%/18%/20%, respectively in CY19. We broadly retain our EPS estimates for CY19. However, the price target is marginally reduced to Rs5,795 (earlier Rs5,936), mainly due...