Motilal Oswal is bullish on Sanofi India has recommended Buy rating on the stock with a target price of Rs 5000 in its research report dated October 31, 2017.
Motilal Oswal's research report on Sanofi India
Sanofi's (SANL) 3QCY17 revenue increased ~7% YoY (+11% QoQ) to INR6.7b (~3.4% miss). EBITDA rose 27% YoY to INR1.8b (+21% beat), as margins expanded ~440bp YoY (+830bp QoQ) to 27.5%. Consequently, PAT increased sharply by 44% YoY to INR1.2b (31% beat). High-single-digit revenue growth, coupled with strong margin: According to AIOCD, secondary sales growth for SANL stood at ~6% YoY, higher than industry, which saw flattish growth of 1%. The company's key therapeutic areas posted strong growth during the quarter: Anti-Diabetic portfolio grew by 24%, Respiratory by 10.8% and Neuro/CNS by 10.5%. High growth of brands like Lantus, Combiflam, Allegra and Amaryl M, and new product launches should drive SANL's revenue growth, in our view. Higher margins attributed to lower raw material cost and other expense: EBITDA margin expanded to 27.5% in 3Q, higher than our estimate of ~22%, mainly on account of lower raw material expense (down ~1,000bp YoY as % of sales) and other expense (down ~620bp YoY). We expect EBITDA margin to normalize at 21-22% over CY16-19E (22.3% in CY16).
We have modeled 9% sales growth, 10% EBITDA growth and 12% earnings growth over CY16-19E. We maintain our Buy rating with a TP of INR5,000 @ 30x 1HCY19 (v/s INR4,820 @ 30x CY18E).
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