Sanofi India's Q3CY18 results (Outperformer) - Strong operational performance
Q3CY18 result highlights
- Revenue for the quarter was Rs7.4b (+11%/9% yoy/qoq; ahead vs our est of Rs6.8bn) despite the GST impacted high base of Q3CY17
- Gross margins came in higher at 55.9% vs 60.3%/57% in Q3CY17/Q2CY18. SG&A costs grew by 5%/1% yoy/qoq to Rs2.5bn.
- Led by higher revenues and GMs, reported EBITDA came in higher at Rs1.88b (+2%/14% yoy/qoq) ahead of our est of Rs1.56b. Reported EBITDA margins for the quarter stood higher at 25.2% (24.1% in Q2CY18) better than our est of 23%.
- Other income stood higher at Rs262mn (+26% each yoy/qoq) vs est of Rs225mn. Tax rate was at 36.4% (37.7% in Q2CY18) vs est of 35%.
- Resultant reported PAT came higher at Rs1.19bn (+3%/20% yoy/qoq) vs est of Rs0.99bn
Key positives: Higher revenues and higher gross margins
Key negatives: Higher tax rate
Impact on financials: We have increased our CY18/CY19 EPS estimates by 4% each
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 16.8x EV/ EBITDA and 29x CY19E PE, which are at discount to those of MNC peers like Glaxo (~31.5x 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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