MOSL: SANOFI INDIA (Buy)-Revenue blip a function of high base; traction in key therapies intact
(SANL IN, Mkt Cap USD2b, CMP INR6069, TP INR7000, 15% Upside, Buy)
** Higher RM cost hurts earnings: 4QCY18 revenue growth was muted (~8% YoY to INR7.2b; our estimate: INR7.7b) 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). 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% YoY to INR1.3b (our estimate: INR1.5b). PAT grew ~4% YoY to INR793m (our estimate: INR885m). On a full-year basis, revenue/EBITDA/PAT grew 11%/16%/17% YoY to INR27.7b/INR6.2b/INR3.8b.
** Anti-diabetic and Gastro drive growth: Growth was largely driven by volumes. Growth in Chronic segment (contributed around half of sales) exceeded that in Acute segment. SANL’s secondary sales grew 12% YoY (industry growth: 9.5% YoY), led by the Anti-diabetic portfolio (+26% YoY; ~28% of sales). Lantus, its largest product, grew by ~32% YoY. Gastrointestinal portfolio (9% of sales) grew by ~61% YoY for the quarter. Enterogermina and Dulcoflex particularly grew sharply. Vaccines (~13% of sales)/Respiratory (~11% of sales) segments exhibited a decline, while Cardiac (~15% of sales) showed subdued growth.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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