Sanofi India reported a weak performance for the quarter with results missing estimates, though numbers are not comparable with the previous quarters as the company had hived off its Ankleshwar facility. Revenue for the quarter declined by 12.8% yoy to Rs 720 cr and is below estimates. During the quarter, COVID-led challenges had an adverse impact on the topline, which resulted in the decline in sales. Operating profit margin (OPM) for the quarter expanded by 160 bps y-o-y to 23.2%, primarily led by lower operating expenses. Sharekhan retains Buy rating with an unchanged price target of Rs 9249. Sanofi India share price today is Rs 8200, up Rs Rs 225 or 2.8%.

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Moreover, during the quarter, Sanofi India reported a one-time exceptional income of Rs 7.8 cr, while tax rate was lower. Consequently, adjusted PAT at Rs 115 cr was down 1.7% yoy, missing estimates. Sanofi India’s Q4 CY20 topline performance was impacted by transient challenges on account of COVID-19; and the same could normalise going ahead.

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Sanofi India is a player with a chronic-intensive focus. Sanofi india is present in various therapy areas such as diabetology, cardiology, dermatology, and neurology. Of these, diabetology and cardiology collectively account for more than half of the company’s domestic sales and have been growing in double digits.

Sanofi India has a sizable presence in cardiology therapy, which has been one of the fastest growing segments for the industry in the quarter ending December 2020. A higher share of chronics augurs well as chronic medicines tend to have sticky demand and provide growth visibility even in uncertain times. Further, strong performance of the top 10 brands (constituting 85% of overall sales) with a dominant share in their respective categories augurs well and provides visibility on growth ahead. Focus on high-growth branded formulations business and favourable mix would help OPM to expand. Consequently, Sanofi India’s PAT is expected to report double-digit 10% CAGR over CY20-CY22E.

Sanofi India Key positives:

Higher share of the chronic segment augurs well, as chronics are the fastest growing segment in the Indian Pharmaceutical Market (IPM)
OPM expanded by 162 bps yoy to 23.2%, backed by savings in operating expensesSanofi India’s Management has recommended a dividend of Rs 365 per share for CY20, which translates into a strong dividend yield of 4.5%

Sanofi India’s Key negatives:

Sales declined by 12.8% yoy, impacted by COVID-led challenge

Sanofi India’s Key Risks:

Inclusion of Sanofi India’s products in the National List of Essential Medicines could have an adverse impact on earnings performanc