IDFC Securities - Sanofi India (SANOFI) Sanofi Indias Q1CY18 results (Outperformer) - In line quarter

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IDFC Securities

Nitin Agarwal

Sanofi India's Q1CY18 results (Outperformer) - In line quarter

Q1CY18 result highlights

Revenue for the quarter stood at Rs6.2b (up 12% yoy; marginally ahead vs our est) aided by the low base in Q1CY17. Mgt indicated that like to like domestic sales growth was 16% for the quarter.
Gross margins came in higher at 56.8% vs 54.2% in Q1CY17 while it was flat sequentially. SG&A costs grew 8% yoy while it was down 20% sequentially due to higher exp in Q4CY17.
Led by steady revenues and GMs reported EBITDA came in at Rs1.34b (+32% yoy; flat qoq) marginally ahead of our est of Rs1.31b. Reported EBITDA margins for the quarter stood at 21.8% (21.2% in Q4CY17) better than our est of 21.2%.
Tax rate stood higher at 37.3% (39.6% in Q4CY17) vs est of 35%. Resultant reported PAT came in line at Rs825m (+38%/9% yoy/qoq) vs est of Rs824mn

Key positives: Inline revenues

Key negatives: Higher tax rate

Impact on financials: We maintain our CY18/CY19 earnings estimates

Valuations & view

A strong marketing presence in India, strategy to aggressively invest in growth, and strong presence in fast growing segments (diabetes and CVS) make Sanofi one of the more promising MNC pharma companies in India. We maintain Outperformer given attractive valuations and steady improvement in operating performance. The stock trades at 14.5x EV/ EBITDA and 25.7x CY19E PE, which are at sharp discount to those of MNC peers like Glaxo (~31.3x EV/ EBITDA; FY19E). Slowdown in exports and continued regulatory interventions in domestic market remain key risks.

11/05/2018 7 EN

Underlying

Sanofi India

Sanofi India is engaged in the research, development, manufacture and production, of: (i) new and existing drugs, pharmaceuticals, haemaccel and biologicals; and, (ii) liquid injectibles, tablets, capsules, ointments, antibiotic powders, drops, syrups, Co.'s products include: Daonil, Avil, Soframycin, Combiflam, Tarivid, Streptase , Rifater and Rifadin INH, Rabipur, Claforan and Rulide (parenteral anti-infectives) Amaryl (oral anti-diabetic), Tavanic (anti-infective), Vaxcem Hib (Haemophilus Influenza type B (HIB) Vaccine), Morupar (measles, mumps, rubella (MMR) Vaccine), Insuman (human insulin) and Cardace-H.

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INE058A01010 National Stock Exchange of India India

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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Analysts

Nitin Agarwal

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Sanofi India's Q1CY18 results (Outperformer) - In line quarter

SANOFI INDIA increases its risk exposure and slightly lowers to Neutral

Event update: Sanofi India (Outperformer) - Strategic shift of global parent

Sanofi India's Q3CY19 results (Outperformer) - Below estimates

GMR Infrastructure's Q3FY20 results (Outperformer) - Air traffic growth improved at the airports; deleveraging process gains momentum

Ambuja Cement's Q4CY19 results (Outperformer) - In line; cost efficiencies at play

Event update: Aurobindo Pharma (Outperformer) - Unit IV receives EIR; positive outcome

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