Maintain ‘buy on Sanofi India, price target Rs 7,000: Motilal Oswal

By: | Updated: February 28, 2019 3:04 AM

Growth in Chronic segment (contributed around half of sales) exceeded that in Acute segment.

The PAT grew 4% YoY to Rs 79.3 crore. (Reuters)

The revenue growth for 4QCY18 was muted (8% YoY to Rs 720 crore; our estimate: Rs 770 crore) relative to secondary sales (+12% YoY) due to a high base, with some support from Lantus (the largest brand) and the smaller brands (ranked 26-50).

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% YoY to Rs 130 crore (our estimate: Rs 150 crore). The PAT grew 4% YoY to Rs 79.3 crore (our estimate: Rs 88.5crore).

On a full-year basis, revenue/ EBITDA /PAT grew 11%/16%/17% YoY to Rs 27.7b/Rs 6.2b/Rs 3.8b.
Growth was largely driven by volumes. Growth in Chronic segment (contributed around half of sales) exceeded that in Acute segment.

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Secondary sales reflect the strong outperformance in anti-diabetic portfolio and healthy growth in Respiratory portfolio. This implies that revenue blip in 4Q was only due to the high base and that growth in key therapies remains robust. Accordingly, we raise our CY19/20E EPS by ~1%/3%. We also roll to 32x (unchanged) 12M forward earnings to arrive at a price target of INR7,000 (prior: INR6,850). We remain positive on SANL on the back of volume-led better-than-industry growth in the domestic formulation segment.

Also, core brands like Lantus, Allegra, Combiflam and Hexaxim continue commanding superior market shares in their respective categories. Maintain ‘buy’.

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Secondary sales reflect the strong outperformance in Anti-diabetic portfolio and healthy growth in Respiratory portfolio.

This implies that revenue blip in 4Q was only due to the high base and that growth in key therapies remains robust.Accordingly, we raise our CY19/20E EPS by 1%/3%. We also roll to 32x (unchanged) 12M forward earnings to arrive at a price target of Rs 7,000 (prior: Rs 6,850). We remain positive on SANL on the back of volume-led better-than-industry growth in the domestic formulation segment.

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