Sanofi India's Q2CY18 results (Outperformer) - Strong operational performance
Q2CY18 result highlights
- Revenue for the quarter was Rs6.8b (up 14%/11% yoy/qoq; ahead vs our est of Rs6.6bn) partially aided by the low base in Q2CY17. Mgt indicated that like to like overall sales growth was 17% for the quarter.
- Gross margins came in higher at 57% vs 55.5% in Q2CY17 while it was flat sequentially. SG&A costs grew by 3%/5% yoy/qoq.
- Led by higher revenues and GMs, reported EBITDA came in at Rs1.65b (+43%/22% yoy/qoq) ahead of our est of Rs1.45b. Reported EBITDA margins for the quarter stood higher at 24.1% (21.8% in Q1CY18) better than our est of 22%.
- Other income stood lower at Rs208mn (-27%/8% yoy/qoq) vs est of Rs250mn. Tax rate was at 37.7% (37.3% in Q1CY18) vs est of 35%.
- Resultant reported PAT came higher at Rs996m (+35%/21% yoy/qoq) vs est of Rs941mn
- Company has declared Rs18/share interim dividend
Key positives: Higher revenues
Key negatives: Higher tax rate
Impact on financials: We have increased our CY18 EPS estimates by 2%
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 19.2x EV/ EBITDA and 30x CY19E PE, which are at sharp discount to those of MNC peers like Glaxo (~34.9x EV/ EBITDA; FY20E). Slowdown in exports and continued regulatory interventions in domestic market remain key risks.
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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