1QCY2017 Result Update | Pharmaceutical
May 9, 2017
Sanofi India
NEUTRAL
CMP
`4,181
Performance Highlights
Target Price
-
Investment Period
-
Y/E Dec. (` cr)
1QCY2017
4QCY2016
% chg (qoq)
1QCY2016
% chg (yoy)
Net sales
513
552
(7.1)
518
(1.1)
Stock Info
Other income
56
55
1.3
64
(11.9)
Sector
Pharmaceutical
Operating profit
61
67
(8.6)
92
(33.2)
Market Cap (` cr)
9,628
Adj. Net profit
Net debt (` cr)
(518.9)
60
51
18.8
83
(27.4)
Source: Company, Angel Research
Beta
0.3
52 Week High / Low
4,770/3,850
For 1QCY2017, Sanofi India posted results which were below expectations on all
Avg. Daily Volume
2,061
fronts. The sales came in at `513cr v/s. `550cr expected, registering a yoy de-
Face Value (`)
10
growth of 1.1%. On the operating front, the EBITDA margin came in at 12.0%
BSE Sensex
29,859
(17.6% expected) v/s. 17.7% in 1QCY2016. Despite better GPM (Gross Profit
Nifty
9,285
Margin), which came in at 54.2% v/s 53.2% in 1QCY2016, the EBIDTA margin
Reuters Code
SANO.BO
was lower, as the other expenses rose by 26.8% yoy, while employee expenses
Bloomberg Code
[email protected]
rose by 6.9% yoy. Consequently, the Adj. PAT came in at `60cr v/s. `83cr in
1QCY2016, a yoy de-growth of 27.4%. This was against the expectations of
`71cr. We maintain our Neutral rating.
Shareholding Pattern (%)
Promoters
60.4
Results lower than expectations on all fronts: For 1QCY2017, Sanofi India posted
MF / Banks / Indian Fls
18.7
results which were below expectations on all fronts. The sales came in at `513cr
FII / NRIs / OCBs
15.4
v/s. `550cr expected, registering a yoy de-growth of 1.1%. On the operating
Indian Public / Others
5.1
front, the EBITDA margin came in at 12.0% (17.6% expected) v/s. 17.7% in
1QCY2016. Despite better GPM (Gross Profit Margin), which came in at 54.2%
v/s 53.2% in 1QCY2016, the EBIDTA margin was lower, as the other expenses
Abs. (%)
3m 1yr
3yr
rose by 26.8% yoy, while employee expenses rose by 6.9% yoy. Consequently, the
Sensex
5.0
16.2
33.6
Adj. PAT came in at `60cr v/s. `83cr in 1QCY2016, a yoy de-growth of 27.4%.
Sanofi India
0.8
(4.4)
41.8
Outlook and valuation: We expect net sales to post 13.9% CAGR to `2,862cr and
3-year price chart
EPS to register 9.2% CAGR to `153.8 over CY2016-18E. At current levels, stock is
4,900
trading at 27.2xCY2018E earnings respectively. We recommend a Neutral rating.
4,500
4,100
Key financials
3,700
Y E Dec (` cr)
CY2015
CY2016
CY2017E
CY2018E
3,300
Net Sales
2,049
2,206
2,508
2,862
2,900
% chg
2,500
9.3
7.7
13.7
14.1
2,100
Net Profit
264.9
296.5
321.8
353.8
1,700
% chg
34.4
11.9
8.5
9.9
EPS (`)
115.2
128.9
139.9
153.8
EBITDA (%)
15.4
16.6
16.8
16.8
Source: Company, Angel Research
P/E (x)
36.3
32.4
29.9
27.2
RoE (%)
19.3
21.6
23.5
25.8
RoCE (%)
14.8
17.1
20.1
23.9
P/BV (x)
5.9
5.5
4.3
3.5
Sarabjit Kour Nangra
EV/Sales (x)
+91 22 3935 7800 Ext: 6806
4.4
4.1
3.4
2.8
[email protected]
EV/EBITDA (x)
28.7
24.8
20.3
16.7
Source: Company, Angel Research; Note: CMP as of May 5, 2017
Please refer to important disclosures at the end of this report
1
Sanofi India | 1QCY2017 Result Update
Exhibit 1: 1QCY2017 performance
Y/E Dec (` cr)
1QCY2017
4QCY2016
% chg (qoq) 1QCY2016
% chg (yoy) CY2016 CY2015
% chg yoy
Net sales
513
552
(7.1)
518
(1.1)
2,206
2,049
7.7
Other income
56
55
1.3
64
(11.9)
233
223
4.6
Total income
569
607
(6.3)
582
(2.3)
2,439
2,272
7.4
PBIDT
61
67
(8.6)
92
(33.2)
366
315
16.0
OPM (%)
12.0
12.2
17.7
16.6
15.4
Interest
0.4
0.4
0.1
2
0
Depreciation & amortization
25
41
(38.6)
27
(6.3)
131
113
16.2
PBT & exceptional items
92
81
13.3
128
(28.6)
466
425
9.7
Less : Exceptional items
0
0
0
0
(56)
Profit before tax
92
81
13.3
128
(28.6)
466
481
(3.1)
Provision for taxation
32
30
4.3
46
(30.8)
169
159
6.1
Net profit
60
51
18.8
83
(27.4)
297
322
(7.6)
Adj net profit
60
51
18.8
83
(27.4)
297
265
11.9
EPS (`)
26.1
22.0
35.9
129.1
115.4
Source: Company, Angel Research
Exhibit 2: 1QCY2017 - Actual Vs Angel estimates
` cr
Actual
Estimates
Variation (%)
Net sales
513
550
(6.8)
Other income
56
55
1.3
Operating profit
61
97
(36.6)
Tax
32
40
(20.3)
Net profit
60
71
(15.1)
Source: Company, Angel Research
Revenue growth lower than expectation
The sales came in at `513cr v/s. `550cr expected, posting a yoy de-growth of
1.1%, mainly on the back of the lower volumes in the exports market.
According to AIOCD, Sanofi posted secondary sales growth of ~10% yoy in
1QFY2017.
Exhibit 3: Sales trend
583
565
570
552
518
513
520
470
420
370
320
1QCY2016 2QCY2016 3QCY2016 4QCY2016 1QCY2017
Source: Company, Angel Research
May 9, 2017
2
Sanofi India | 1QCY2017 Result Update
OPM dips to 12.0%: On the operating front, the EBITDA margin came in at 12.0%
(17.6% expected) v/s. 17.7% in 1QCY2016. Despite better GPM (Gross Profit
Margin), which came in at 54.2% v/s 53.2% in 1QCY2016, the EBIDTA margin
was lower, as the other expenses rose by 26.8% yoy, while employee expenses
rose by 6.9% yoy.
Exhibit 4: OPM trend
21.0
17.7
18.0
18.2
15.0
12.0
12.0
12.2
12.2
9.0
6.0
3.0
0.0
1QCY2016
2QCY2016
3QCY2016
4QCY2016
1QCY2017
Source: Company, Angel Research
Bottom-line much lower than estimates: Consequently, the Adj. PAT came in at
`60cr v/s. `83cr in 1QCY2016, a yoy de-growth of 27.4%. This was against the
expectations of `71cr. Other income, which came in at `56.1cr, dipped 11.9%
yoy.
Exhibit 5: Adj. Net Profit trend
90
85
83
81
80
70
60
60
51
50
40
30
20
10
0
1QCY2016 2QCY2016 3QCY2016 4QCY2016 1QCY2017
Source: Company, Angel Research
May 9, 2017
3
Sanofi India | 1QCY2017 Result Update
Recommendation rationale
Focus on top-line growth: Sanofi recorded revenue CAGR of 12.6% to `2,206cr
over CY2010-16. The growth was impacted by a lower-than-expected growth in
domestic formulations and loss of distribution rights of Rabipur vaccine. Going
forward, in order to grow in-line with the industry’s average growth rate in the
domestic segment, the company has rolled out a project - Prayas, an initiative to
increase its penetration in rural areas. Under the project, the company would
launch low-priced products in the anti-infective and NSAID therapeutic segments
and increase its field force. Sanofi also launched CVS and vaccine products in the
domestic market post the acquisition of Shantha Biotech by its parent company.
Further, during CY2011, the company acquired the nutraceutical business of
Universal Medicare Pvt. Ltd, which led the company’s foray into the nutraceutical
business, thus aiding it in diversifying and boosting overall growth of its domestic
formulation business. We expect the company’s net sales to log 13.9% CAGR over
CY2016-18, mainly driven by domestic formulation.
Valuation: We expect net sales to post 13.9% CAGR to `2,862cr and EPS to
register 9.2% CAGR to `153.8 over CY2016-18. At current levels, the stock is
trading at 29.9x and 27.2x its CY2017 and CY2018E earnings respectively. Given
the rich valuations, we recommend a Neutral rating.
Exhibit 6: Key assumptions
CY2017E
CY2018E
Net sales growth (%)
13.7
14.1
Growth in employee expenses (%)
13.7
14.1
Operating margins (%)
16.8
16.8
Net profit growth (%)
8.5
9.9
Capex (` cr)
80.0
80.0
Source: Company, Angel Research
Exhibit 7: One-year forward P/E
6,000
5,000
4,000
3,000
2,000
1,000
0
Price
10x
15x
20x
25x
Source: Company, Angel Research
May 9, 2017
4
Sanofi India | 1QCY2017 Result Update
Exhibit 8: Recommendation summary
Company
Reco.
CMP
Tgt Price
Upside
FY2018E
FY16-18E
FY2018E
(`)
(`)
(%) PE (x) EV/Sales (x) EV/EBITDA (x)
CAGR in EPS (%) RoCE (%) RoE (%)
Alembic Pharma
Accumulate
593
648
9.2
23.2
2.6
12.9
(18.2)
25.7
22.8
Aurobindo Pharma
Buy
590
877
48.7
12.5
2.1
8.8
18.1
22.5
26.1
Cadila Healthcare
Neutral
466
-
-
24.3
3.8
17.6
13.5
23.6
27.1
Cipla
Sell
549
465
(15.2)
22.4
2.5
15.1
14.2
12.2
13.9
Dr Reddy's
Neutral
2,602
-
-
19.9
2.4
10.2
(2.7)
15.3
15.2
Dishman Pharma
Sell
313
143
(54.3)
27.7
3.0
13.1
16.3
13.0
13.5
GSK Pharma
Neutral
2,445
-
-
40.5
6.1
29.8
16.9
37.5
34.5
Indoco Remedies
Accumulate
225
240
6.6
14.1
1.7
9.1
33.2
19.1
20.1
Ipca labs
Accumulate
538
613
14.0
28.0
1.9
12.5
34.8
8.6
9.5
Lupin
Buy
1,251
1,809
44.7
18.0
3.0
11.1
17.2
24.4
20.9
Sanofi India*
Neutral
4,181
-
-
29.9
3.4
20.3
10.2
20.1
23.5
Sun Pharma
Buy
631
847
34.3
17.9
3.7
11.3
26.5
18.9
20.1
Source: Company, Angel Research, *-Note December ending company
Company Background
Sanofi, a leading global pharmaceutical company, operates in India through four
entities - Sanofi India, Sanofi-Synthelabo (India) Ltd, Sanofi Pasteur India Private
Ltd and Shantha Biotechnics. Sanofi India focuses its activities on seven major
therapeutic areas, namely
- Cardiovascular diseases, Metabolic Disorders,
Thrombosis, Oncology, Central Nervous System disorders, Internal Medicine and
Vaccines. Predominately a domestic company, the company exports to
semi-regulated markets, exports of ~`500cr, contributed around 26% of sales in
CY2016E.
May 9, 2017
5
Sanofi India | 1QCY2017 Result Update
Profit & loss statement
Y/E Dec. (` cr)
CY13
CY14
CY15
CY16
CY17E
CY18E
Gross sales
1,745
1,916
2,093
2,253
2,564
2,919
Less: Excise duty
38
41
44
47
56
57
Net sales
1,707
1,875
2,049
2,206
2,508
2,862
Other operating income
102
103
144
162
162
162
Total operating income
1,809
1,978
2,193
2,369
2,671
3,025
% chg
14.1
9.3
10.9
8.0
12.8
13.2
Total expenditure
1,411
1,639
1,734
1,841
2,086
2,380
Net raw materials
820
974
1,012
1,065
1,204
1,374
Other mfg costs
82
93
106
115
130
149
Personnel
242
288
333
359
408
466
Other
267
283
283
302
343
391
EBITDA
296
236
315
366
423
482
% chg
27.0
7.3
8.3
9.3
10.3
11.3
(% of Net Sales)
17.3
12.6
15.4
16.6
16.8
16.8
Dep. & amortisation
92
97
113
131
147
155
EBIT
203
140
202
234
276
328
% chg
42.4
5.7
6.7
7.7
8.7
9.7
(% of Net Sales)
11.9
10.2
11.2
12.2
13.2
14.2
Interest & other charges
0
-
-
-
-
-
Other income
58
64
135
71
71
71
(% of PBT)
15.9
18.6
19.6
20.6
21.6
22.6
Share in profit of Asso.
-
-
-
-
-
1.0
Recurring PBT
363
307
481
468
509
561
% chg
38.7
3.8
4.8
5.8
6.8
7.8
Extraordinary Exp./(Inc.)
PBT (reported)
363
307
481
468
509
561
Tax
123.3
109.0
159.4
169.1
184.3
203.0
(% of PBT)
33.9
35.6
33.1
36.2
36.2
36.2
PAT (reported)
240
198
322
299
325
358
Extra-ordinary items
(25)
(67)
56
-
-
-
PAT after MI (reported)
266
264
321
297
322
354
ADJ. PAT
240
197
265
297
322
354
% chg
35.4
(17.8)
34.4
11.9
8.5
9.9
(% of Net Sales)
15.6
14.1
15.7
13.4
12.8
12.4
Basic EPS (`)
104
86
115
129
140
154
Fully Diluted EPS (`)
104
86
115
129
140
154
% chg
35.4
(17.8)
34.6
11.9
8.5
9.9
May 9, 2017
6
Sanofi India | 1QCY2017 Result Update
Balance sheet
Y/E Dec (` cr)
CY13
CY14
CY15
CY16
CY17E
CY18E
SOURCES OF FUNDS
Equity share capital
23
23
23
23
23
23
Preference Capital
-
-
-
-
-
-
Reserves & surplus
1,324
1,463
1,604
1,713
2,195
2,709
Shareholders funds
1,347
1,486
1,627
1,736
2,218
2,732
Long term provisions
25
32
40
40
40
40
Other long term liabilities
-
-
-
-
-
-
Total loans
-
-
-
-
-
-
Total liabilities
1,372
1,518
1,668
1,778
2,261
2,776
APPLICATION OF FUNDS
Gross block
1,075
1,195
1,349
1,427
1,507
1,587
Less: Acc. Depreciation
409
506
619
750
897
1,051
Net block
666
690
730
677
610
535
Goodwill
125
125
125
125
125
125
Capital Work-in-Progress
43
43
43
43
43
43
Long term loan and adv.
62
106
262
129
129
129
Investments
0.2
0.2
0.2
0.2
0.2
0.2
Current assets
947
1,263
1,245
1,567
2,209
2,906
Cash
264
469
572
559
1,018
1,547
Loans & advances
219
196
337
363
412
471
Other
464
598
336
646
778
888
Current liabilities
435
656
617
668
759
866
Net current assets
512
607
628
900
1,450
2,039
Deferred tax assets
(37)
(54)
(120)
(97)
(97)
(97)
Total assets
1,372
1,518
1,668
1,778
2,261
2,776
May 9, 2017
7
Sanofi India | 1QCY2017 Result Update
Cash flow statement
Y/E Dec. (` cr)
CY13
CY14
CY15
CY16
CY17E
CY18E
Profit before tax
278
291
292
293
294
295
Depreciation
92
97
113
131
147
155
(Inc)/Dec in Working Capital
236
(64)
73
152
91
61
Less: Other income
102
66
67
68
69
70
Direct taxes paid
89
93
94
95
96
97
Cash Flow from Operations
415
164
317
414
366
344
(Inc.)/Dec.in Fixed Assets
(186)
(120)
(154)
(78)
(80)
(80)
(Inc.)/Dec. in Investments
0
0
-
-
-
-
Other income
102
66
67
68
69
70
Cash Flow from Investing
(84)
41
42
43
44
45
Issue of Equity
-
-
-
-
-
-
Inc./(Dec.) in loans
-
-
-
-
-
-
Dividend Paid (Incl. Tax)
(104)
(104)
(104)
(160)
(160)
(160)
Others
(393)
102
(153)
(310)
210
(758)
Cash Flow from Financing
(496)
(1)
(257)
(470)
49
(918)
Inc./(Dec.) in Cash
(164)
204
103
(13)
460
(529)
Opening Cash balances
429
264
469
572
559
1,018
Closing Cash balances
264
469
572
559
1,018
1,547
May 9, 2017
8
Sanofi India | 1QCY2017 Result Update
Key ratios
Y/E Dec.
CY13
CY14
CY15
CY16
CY17E CY18E
Valuation Ratio (x)
P/E (on FDEPS)
40.2
48.8
36.3
32.4
29.9
27.2
P/CEPS
26.9
26.7
22.2
22.5
20.5
18.9
P/BV
7.1
6.5
5.9
5.5
4.3
3.5
EV/Sales
5.5
4.9
4.4
4.1
3.4
2.8
EV/EBITDA
31.7
38.7
28.7
24.8
20.3
16.7
Per Share Data (`)
EPS (Basic)
104.1
85.6
115.2
128.9
139.9
153.8
EPS (fully diluted)
104.1
85.6
115.2
128.9
139.9
153.8
Cash EPS
155.4
156.7
188.7
186.0
203.7
221.1
DPS
33.0
33.0
33.0
68.0
68.0
68.0
Book Value
584.8
645.2
707.4
754.6
964.2
1,187.8
Returns (%)
RoCE (Pre-tax)
15.7
10.2
14.8
17.1
20.1
23.9
Angel ROIC (Pre-tax)
22.4
14.6
21.1
24.4
28.7
34.0
ROE
18.8
14.4
19.3
21.6
23.5
25.8
Turnover ratios (x)
Inventory / Sales (days)
31
28
26
24
21
19
Receivables (days)
9
8
7
7
6
6
Payables (days)
24
21
20
19
17
15
May 9, 2017
9
Sanofi India | 1QCY2017 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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offering of securities of the company covered by Analyst during the past twelve months.
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Disclosure of Interest Statement
Sanofi India
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
May 9, 2017
10