Sanofi India's (SIL) revenue in 2QCY20 stood at Rs7,105mn, below our/consensus estimates by 5.9%/2%, respectively. Revenue declined by 5% YoY due to the COVID pandemic. Gross margin was lower QoQ at 55.5% but was up by 107bps YoY. Net profit at Rs1,363mn was above our/consensus estimates by 35.3%/30.2%, respectively. EBITDA for the quarter stood at Rs1,772mn, which was 14.1% ahead of our estimate. EBITDA margin stood at 24.9%, which represents an increase of 242bps QoQ and 384bps YoY. The beat in EBITDA and PAT despite lower revenue was mainly due to lower than expected other expenses. The other expenses were lower QoQ and YoY by...

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,...

Sanofi India's (SIL) revenue in 1QCY20 stood at Rs7,845mn, below our/consensus estimates by 0.6%/0.5%, respectively. Revenue grew by 9.4% YoY but declined by 5.1% QoQ. Gross margin was flattish QoQ at 56.6% and was down by 44bps YoY. Net profit at Rs854mn was below our/consensus estimates by 35.3% and 30.2%, respectively. Net profit was adversely impacted by an exceptional charge of Rs504mn. The exceptional charge pertains to impairment of maintenance capital expense and few other incidental expenses incurred on the Ankleshwar facility, which has been classified as asset for sale. The company will continue to invest maintenance capital, which will be impaired...

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,...

Sanofi India (SIL) reported robust revenue growth however the profit for the quarter was lower due to an exceptional charge of Rs199mn on account of impairment of the divested facility at Ankleshwar and a higher tax rate. The Ankleshwar facility has been classified as asset held for sale and the divestment transaction is expected to close by March 30, 2020. As a result of the classification, the net block has been reduced by Rs1,602mn. The company will continue to spend on the maintenance of the facility until it is transferred to Zentiva. The maintenance charges towards the facility will be impaired. The company recommended a total dividend of Rs349 per share, which includes a one-time...

Sanofi India's (SIL) revenue in 3QCY19 stood at Rs7,791mn, above our estimate by 2%. Revenue grew by 5% YoY and 4% QoQ, respectively. Net profit at Rs1,266mn was above our/consensus estimate by 7% and 36%, respectively. Net profit benefitted from the new tax regulation. The effective tax rate for the quarter stood at 4% as excess tax expense booked in previous quarters was written back. The write back effectively helped net profit by Rs380mn. However, the company also took an impairment charge of Rs394mn related to its Ankleshwar facility. The impairment charge has been taken considering the discontinuation of supply contract with Zentiva. Adjusting for the one-offs reported profit would have been Rs1280mn....

Sanofi India's (SIL) revenue in 3QCY19 stood at Rs7,791mn, above our estimate by 2%. Revenue grew by 5% YoY and 4% QoQ, respectively. Net profit at Rs1,266mn was above our/consensus estimate by 7% and 36%, respectively. Net profit benefitted from the new tax regulation. The effective tax rate for the quarter stood at 4% as excess tax expense booked in previous quarters was written back. The write back effectively helped net profit by Rs380mn. However, the company also took an impairment charge of Rs394mn related to its Ankleshwar facility. The impairment charge has been taken considering the discontinuation of supply contract with Zentiva. Adjusting for the one-offs reported profit would have been Rs1280mn....

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....

Sanofi India's (SIL) revenues in 2QCY19 stood at Rs7,479mn, below our/consensus estimate by Sector: Pharmaceuticals 1.5%/3.3%, respectively (partially impacted by Euro depreciation). Revenues grew 9.4% YoY and 4.3% QoQ, respectively. Net Earnings at Rs974mn, was below our/consensus estimate by CMP: Rs6,112 15.0%/5.1%, respectively primarily due to a 550bps YoY and 250bps QoQ decline in gross margins. Raw material costs increased outpaced increase in revenues. During the quarter raw Target Price: Rs6,471 material costs increased QoQ / YoY by Rs. 320 mn / Rs. 640mn, as against a revenue increase of Rs. 310mn / 650mn implying some extraordinary charges related to inventory / raw material or Upside: 6%...

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...

Sanofi India's (SIL) revenues in 1QCY19 stood at Rs7,173mn, above our/consensus estimate by 2.9%/3.3%, respectively. Revenues grew 16.1% YoY and decreased 1.3% QoQ. The company has not disclosed the break-up of its revenues between domestic and export markets. Cost of sales at 42.9% was higher by 250bps YoY because of the combined impact of a changing business mix with higher exports, price inflation in APIs and depreciation of the Indian rupee or INR. We tweak our forecasts for India brand business to account for WPI inflation of 4.5%in essential drug category and arrive at...

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 India's (SIL) revenues in CY18 stood at Rs27,708mn, showing a growth of 11% compared to a year ago. The revenue mix witnessed a sharp change in favour of exports. The share of exports in total revenues increased to 30% from 26%. Exports grew 25% YoY, while the domestic business underperformed because of price cuts and potentially a correction in channel inventory. We believe the 100bps decline in gross margin on YoY basis can be primarily attributed to a higher share of export sales, which are associated with higher raw material costs. Apart from a rising share of exports, the company also went for price cut of Amaryl, which is one of the top brands in SIL's portfolio. Amaryl witnessed price cuts in some of its extension brands...

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...

Sanofi India's revenues in 4QCY18 stood at Rs7,264mn, above our/consensus estimate by 4.6%/6.7%, respectively. Revenues grew 8.4% YoY and decreased 2.3% QoQ. The company has not disclosed the break-up of revenues between domestic and export markets. Cost of sales at 43.1% was higher 230bps YoY and also carries the impact of depreciation of the Indian rupee or INR against the euro and the US dollar. We have revised our estimates to account for the deviation from our estimates and arrived at a revised target price of Rs7,039 (from Rs7,570 earlier) for...

26 February 2019 4QCY18 revenue growth was muted (~8% YoY) due to a high base, with some support from Lantus (the largest brand) and the smaller brands (ranked 26-50). Gross margin shrank by ~200bp YoY (-140bp QoQ) to 57% due to increased RM cost. EBITDA margin contracted by ~110bp YoY to 18.9% (our est. 19.8%) due to higher employee cost (+60bp YoY to 14.2% of sales), partly offset by a decline in other expenses (-180bp YoY, 23.8%). Consequently, EBITDA improved ~2% 11%/16%/17% YoY to INR27.7b/INR6.2b/INR3.8b. Growth was largely driven by volumes. Growth in Chronic segment (contributed around half of sales) exceeded that in Acute segment. SANLs secondary sales grew 12% YoY ~28% of sales).

Sanofi India's revenues in 3QCY18 stood at Rs7,438mn which were above our/consensus estimate by 10.4%/9.2%, respectively. Revenues grew 8.8%/11.4% on QoQ/YoY basis, respectively. The company has not disclosed the break-up of revenues (between domestic and export markets) and we believe the outperformance was driven by higher exports during the quarter as gross margin was 100bps down QoQ and cost of sales grew 12.5% QoQ, faster than sales, indicating an adverse product/business mix. Cost of sales also carries the impact of depreciation of the Indian rupee or INR against the euro and US dollar. Sanofi India...

Sanofi India limited (SIL), a subsidiary of Sanofi SA (based in France)- a global pharmaceutical player that discovers, develops and distributes medicines across various therapy segments. SIL is ranked 18th in the Indian pharmaceutical market with a share of about 1.7%. It is present across various therapies such as diabetes, cardiology, thrombosis, central nervous system (CNS) and antihistamines in India. Exports account for about 26% of its business. We initiate coverage on SIL with a Buy rating and a target price of Rs.7,570. Our target price is based on 28x P/E multiple on CY20E earnings. We expect SIL revenues to clock 11% CAGR, while net earnings should grow 24% over...