Sanofi reported strong numbers for Q1CY23. Revenues increased by ~4.2% y-o-y and adjusted PAT grew by ~15.2% y-o-y to Rs. 172.6 crore. This was due to a ~370 bps y-o-y expansion in EBITDA margins to ~31.2%, which was far above the internal estimate of ~26.5%. It was driven by improved raw materials and other operating costs. We continue to believe its focus on rationalization of operations have led to expansion in profitability. We expect ~ 13.9% PAT CAGR over CY22-CY24E. The company has declared de-merger of its consumer business in a separate entity called Sanofi India Consumer Healthcare Ltd. (SICHL) at a 1:1 ratio, which is likely to be complete in the mid of CY24. This offers strong unlocking of value for Sanofi India’s shareholders.
OutlookWe retain a Buy on Sanofi India with a revised PT of Rs 7,500. The stock is trading at an attractive valuation of ~25.1x/23.2x its CY2023E/24E earnings.
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