3QCY2015 Result Update | Pharmaceutical
October 30, 2015
Sanofi India
NEUTRAL
CMP
`4,262
Performance Highlights
Target Price
-
Y/E Dec. (` cr)
3QCY2015 2QCY2015
% chg (qoq) 2QCY2014
% chg (yoy)
Investment Period
-
Net sales
553
514
7.5
487
13.4
Other income
42
45
(6.4)
42
1.7
Stock Info
Operating profit
109
86
26.6
76
42.7
Sector
Pharmaceutical
Adj. Net profit
73
64
12.9
62
16.9
Market Cap (` cr)
9,816
Source: Company, Angel Research
Net debt (` cr)
(239)
Beta
0.4
Sanofi India (Sanofi)’s 3QCY2015 results have come in marginally higher than
our expectation. The company posted a 13.4% yoy growth in revenues to `553cr
52 Week High / Low
4,581/3,090
V/s an expected `536cr. On the operating front, the gross margin came in at
Avg. Daily Volume
2,067
52.0% V/s an expected 48.3% and V/s 48.2% in the corresponding period of last
Face Value (`)
10
year. The OPM came in at 19.7% V/s an expected 17.8% and V/s 15.7% in the
BSE Sensex
27,253
corresponding period of last year. Consequently, the PAT came in at `72.5cr (V/s
Nifty
8,233
an expected `70.0cr), a yoy growth of 16.9%. We recommend a Neutral rating
Reuters Code
SANO.BO
on the stock.
Bloomberg Code
[email protected]
Better-than-expected results, mainly on OPM front: The company posted a 13.4%
yoy growth in revenues to `553cr V/s an expected `536cr. We expect revenue
Shareholding Pattern (%)
growth to sustain in the coming quarters with improvement in volumes along with
Promoters
60.4
likely price hikes in DPCO products. On the operating front, the gross margin
MF / Banks / Indian Fls
21.5
came in at 52.0% V/s an expected 48.3% and V/s 48.2% in the corresponding
FII / NRIs / OCBs
13.0
period of last year. The OPM came in at 19.7% V/s an expected 17.8% and V/s
Indian Public / Others
5.1
15.7% in the corresponding period of last year. Consequently, the PAT came in at
`73cr (V/s an expected `70cr), a yoy growth of 16.9%. Tax as % of PBT was
40.7% V/s 34.0% in 3QCY2014. Other income for the quarter, at `42cr, was
Abs. (%)
3m 1yr
3yr
same as in the corresponding period of last year.
Sensex
(1.1)
1.9
46.3
Sanofi India
12.7
27.4
91.8
Outlook and valuation: We expect net sales to post a 10.5% CAGR to `2,371cr
and EPS to register a 33.1% CAGR to `151.5 over CY2014-16. At current levels,
3-year price chart
the stock is trading at 36.0x and 28.1x its CY2015E and CY2016E earnings,
respectively. Given the rich valuations, we recommend a Neutral rating on the
4,200
stock.
3,700
3,200
Key financials
Y E Dec (` cr)
CY2013
CY2014
CY2015E
CY2016E
2,700
Net Sales
1,707
1,875
2,082
2,371
2,200
% chg
14.2
9.9
11.1
13.9
1,700
2
3
3
4
4
5
5
1
1
1
1
Net Profit
239.8
197.1
272.3
349.0
ŧ
1
ŧ
1
ŧ
1
ŧ
c
r
p
c
r
p
c
r
p
c
O
A
O
A
O
A
O
% chg
35.4
(17.8)
38.2
28.2
EPS (`)
104.1
85.6
118.2
151.5
Source: Company, Angel Research
EBITDA(%)
17.3
12.6
17.4
20.8
P/E (x)
40.9
49.8
36.0
28.1
RoE (%)
18.8
14.4
19.9
25.5
RoCE (%)
15.7
10.2
18.5
27.9
P/BV (x)
7.3
6.6
5.3
4.2
Sarabjit Kour Nangra
EV/Sales (x)
5.6
5.0
4.4
3.6
+91 22 3935 7800 Ext: 6806
EV/EBITDA (x)
32.3
39.5
25.1
17.4
[email protected]
Source: Company, Angel Research; Note: CMP as of October 27, 2015
Please refer to important disclosures at the end of this report
1
Sanofi India | 3QCY2015 Result Update
Exhibit 1: 3QCY2015 performance
Y/E Dec (` cr)
3QCY2015
2QCY2015
% chg (qoq) 3QCY2014
% chg (yoy) 9MCY15 9MCY14
% chg yoy
Net sales
553
514
7.5
487
13.4
1,527
1,394
9.5
Other income
42
45
(6.4)
42
1.7
152
121
26.0
Total income
595
560
6.4
529
12.5
1,679
1,515
10.8
PBIDT
109
86
26.6
76
42.7
249
211
17.9
OPM (%)
19.7
16.7
15.7
16.3
15.1
Interest
0.1
0.1
0.0
0
0
Depreciation & amortisation
29
28
2.1
24
20.8
83
72
15.8
PBT & exceptional items
122
103
18.9
94
30.0
317
260
22.3
Less : Exceptional items
0
0
0
16
0
Profit before tax
122
103
18.9
94
30.0
301
260
16.1
Provision for taxation
50
39
28.8
32
55.3
116
88
31.9
Net profit
73
64
12.9
62
16.9
185
171
8.3
Adj net profit
73
64
12.9
62
16.9
169
171
(1.2)
EPS (`)
31.5
27.9
26.9
73.5
74.4
Source: Company, Angel Research
Exhibit 2: 3QCY2015 - Actual Vs Angel estimates
` cr
Actual
Estimates
Variation (%)
Net sales
553
536
3.1
Other income
42
42
1.7
Operating profit
109
95
14.2
Tax
50
39
28.8
Net profit
73
70
3.6
Source: Company, Angel Research
Revenue growth higher than expectation
The company posted sales of `553cr (V/s an expected `536cr), a yoy growth of
13.4%. We expect revenue growth to sustain in the coming quarters with
improvement in volumes along with likely price hikes in DPCO products.
Exhibit 3: Sales trend
570
553
514
520
487
481
460
470
420
370
320
3QCY2014
4QCY2014
1QCY2015
2QCY2015
3QCY2015
Source: Company, Angel Research
October 30, 2015
2
Sanofi India | 3QCY2015 Result Update
OPM dips to 19.7%: On the operating front, the gross margin came in at 52.0%
V/s an expected 48.3% and V/s 48.2% in the corresponding period of last year.
The expansion in the gross margins came on the back of price hikes. The OPM
came in at 19.7% V/s an expected 17.8% and V/s 15.7% in the corresponding
period of last year.
Exhibit 4: OPM trend
21.0
19.7
18.0
15.7
15.0
16.7
12.0
11.7
9.0
5.2
6.0
3.0
0.0
3QCY2014
4QCY2014
1QCY2015
2QCY2015
3QCY2015
Source: Company, Angel Research
Bottom-line higher than estimate: The PAT came in at `72.5cr (V/s an expected
`70.0cr), a yoy growth of 16.9%. The other income during the quarter came in at
`42.4cr V/s `41.7cr in 3QCY2014, while tax as a % of PBT was at 40.7% V/s
34.0% in 3QCY2014.
Exhibit 5: Adj. net profit trend
80
73
70
70
64
62
60
50
40
30
26
20
10
0
3QCY2014
4QCY2014
1QCY2015
2QCY2015
3QCY2015
Source: Company, Angel Research
October 30, 2015
3
Sanofi India | 3QCY2015 Result Update
Recommendation rationale
Focus on top-line growth: Sanofi recorded revenue CAGR of 9.1% to `1,494cr
over CY2006-12. The growth was impacted by a lower-than-expected growth in
domestic formulations and loss of distribution rights of Rabipur vaccine. Going
forward, 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. The project is expected to provide incremental revenue of `500cr
over the next five years.
Sanofi also plans to launch 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 nutarceutical business, thus aiding it in
diversifying, and boosting overall growth of its domestic formulation business.
During 2HCY2014 the company’s sales were impacted by the July 2014 National
Pharmaceutical Pricing Authority (NPPA) order which has brought 80 formulations
pertaining to 50 drugs under price control. This severely impacted the company as
three of its major products came under price control. The company is estimated to
suffer a value loss of `120cr on an annualized basis. However, on the positive side
the government has revoked the order, which should aid a recovery in the
domestic formulation sales of the company, going forward. We expect the
company’s net sales to log a 12.4% CAGR over CY2014-17, with domestic
formulation sales expected to post a yoy growth of around 20.0% during the
period.
Valuation: We expect net sales to post a 10.5% CAGR to `2,371cr and EPS to
register a 33.1% CAGR to `151.5 over CY2014-16. At current levels, the stock is
trading at 36.0x and 28.1x its CY2015E and CY2016E earnings, respectively. Given
the rich valuations, we recommend a Neutral rating on the stock.
Exhibit 6: Key assumptions
CY2015E
CY2016E
Net sales growth (%)
11.1
13.9
Domestic sales growth (%)
20.0
15.0
Export sales growth (%)
6.0
10.0
Growth in employee expenses (%)
18.8
6.6
Operating margins (%)
17.4
20.8
Net profit growth (%)
38.2
28.2
Capex (` cr)
30.0
30.0
Source: Company, Angel Research
October 30, 2015
4
Sanofi India | 3QCY2015 Result Update
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
Exhibit 8: Recommendation summary
Company
Reco.
CMP Tgt Price Upside
FY2017E
FY15-17E
FY2017E
EV/Sales
EV/EBITDA
CAGR in EPS
RoCE
(`)
(`)
(%)
PE (x)
RoE (%)
(x)
(x)
(%)
(%)
Alembic Pharma
Neutral
664
-
-
27.8
4.0
19.7
26.2
31.5
31.8
Aurobindo Pharma Neutral
846
-
19.4
3.1
13.5
16.3
23.4
30.2
Cadila Healthcare
Neutral
425
-
-
24.1
3.6
16.5
24.6
25.2
29.0
Cipla
Neutral
684
-
-
22.4
3.2
16.1
24.6
18.0
17.5
Dr Reddy's
Neutral
4,182
-
-
21.7
3.3
14.4
21.6
20.6
22.0
Dishman Pharma
Neutral
346
-
-
16.0
1.5
7.5
20.4
11.7
11.7
GSK Pharma*
Neutral
3,271
-
-
47.9
8.4
37.8
6.6
33.7
34.3
Indoco Remedies
Neutral
333
-
-
21.5
2.5
13.7
31.4
20.1
21.1
Ipca labs
Neutral
781
-
-
24.4
2.6
14.1
26.1
13.0
14.9
Lupin
Neutral
1,946
-
-
27.4
4.7
17.5
9.7
27.9
23.4
Sanofi India*
Neutral
4,262
-
-
28.1
3.6
17.4
33.1
27.9
25.5
Sun Pharma
Neutral
905
-
-
33.7
6.0
19.6
8.4
15.8
16.6
Source: Company, Angel Research
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 at ~`500cr, contributed around 26% of sales in
CY2014.
October 30, 2015
5
Sanofi India | 3QCY2015 Result Update
Profit & loss statement
Y/E Dec. (` cr)
CY2011
CY2012
CY2013
CY2014
CY2015E
CY2016E
Gross sales
1,259
1,534
1,746
1,915
2,131
2,427
Less: Excise duty
29
40
39
40
48
56
Net sales
1,230
1,494
1,707
1,875
2,082
2,371
Other operating income
86
91
102
103
103
103
Total operating income
1,315
1,585
1,809
1,978
2,185
2,474
% chg
15.0
20.5
14.1
9.3
10.5
13.2
Total expenditure
1,054
1,261
1,411
1,639
1,720
1,877
Net raw materials
619
735
820
974
947
1,055
Other mfg costs
61
74
82
93
106
114
Personnel
174
214
242
288
340
336
Other
199
238
267
283
326
372
EBITDA
176
233
296
236
362
494
% chg
22.9
32.2
27.0
7.3
8.3
9.3
(% of Net Sales)
14.3
15.6
17.3
12.6
17.4
20.8
Depreciation& amortisation
31
90
92
97
109
112
EBIT
145
143
203
140
253
382
% chg
18.2
(1.5)
42.4
5.7
6.7
7.7
(% of Net Sales)
11.8
9.6
11.9
10.2
11.2
12.2
Interest & other charges
0
1
0
-
-
-
Other income
54
30
58
64
100
100
(% of PBT)
19.0
11.4
15.9
18.6
19.6
20.6
Share in profit of Associates
-
-
-
-
-
-
Recurring PBT
284
262
363
307
456
585
% chg
21.8
(7.7)
38.7
3.8
4.8
5.8
Extraordinary Expense/(Inc.)
-
PBT (reported)
284
262
363
307
456
585
Tax
92.8
85.0
123.3
109.0
182.2
234.0
(% of PBT)
32.7
32.4
33.9
35.6
40.0
40.0
PAT (reported)
191
177
240
198
273
351
Extra-ordinary items
(0)
(0)
(25)
(67)
-
-
PAT after MI (reported)
191
177
266
264
272
349
ADJ. PAT
191
177
240
197
272
349
% chg
23.3
(7.4)
35.4
(17.8)
38.2
28.2
(% of Net Sales)
15.5
11.8
15.6
14.1
13.1
14.7
Basic EPS (`)
83
77
104
86
118
152
Fully Diluted EPS (`)
83
77
104
86
118
152
% chg
23.3
(7.4)
35.4
(17.8)
38.2
28.2
October 30, 2015
6
Sanofi India | 3QCY2015 Result Update
Balance sheet
Y/E Dec (` cr)
CY2011 CY2012 CY2013 CY2014 CY2015E CY2016E
SOURCES OF FUNDS
Equity share capital
23
23
23
23
23
23
Preference Capital
-
-
-
-
-
-
Reserves & surplus
1,094
1,181
1,324
1,463
1,839
2,291
Shareholders funds
1,117
1,204
1,347
1,486
1,862
2,314
Long term provisions
20
19
25
32
32
32
Other long term liabilities
1
-
-
-
-
-
Total loans
-
-
-
-
-
-
Total liabilities
1,137
1,223
1,372
1,518
1,895
2,349
APPLICATION OF FUNDS
Gross block
843
889
1,075
1,195
1,225
1,255
Less: Acc. depreciation
231
315
409
506
615
726
Net block
612
574
666
690
611
529
Goodwill
125
125
125
125
125
125
Capital Work-in-Progress
23
43
43
43
43
43
Long term loan and adv.
76
61
62
106
106
106
Investments
0.4
0.4
0.2
0.2
0.2
0.2
Current assets
667
827
947
1,263
1,670
2,290
Cash
234
429
264
469
718
1,206
Loans & advances
174
208
219
196
305
348
Other
327
191
464
598
646
736
Current liabilities
357
387
435
656
607
691
Net current assets
310
441
512
607
1,063
1,599
Deferred tax assets
(8)
(21)
(37)
(54)
(54)
(54)
Total assets
1,137
1,223
1,372
1,518
1,895
2,349
October 30, 2015
7
Sanofi India | 3QCY2015 Result Update
Cash flow statement
Y/E Dec. (` cr)
CY2011 CY2012 CY2013 CY2014 CY2015E CY2016E
Profit before tax
282
285
291
292
293
282
Depreciation
90
92
97
109
112
90
(Inc)/Dec in Working Capital
(147)
236
(64)
207
48
(147)
Less: Other income
91
102
66
67
68
91
Direct taxes paid
93
91
93
94
95
93
Cash Flow from Operations
41
420
164
447
290
41
(Inc.)/Dec.in Fixed Assets
(67)
(186)
(120)
(30)
(30)
(67)
(Inc.)/Dec. in Investments
-
0
0
-
-
-
Other income
91
102
66
67
68
91
Cash Flow from Investing
24
(84)
41
42
43
24
Issue of Equity
-
-
-
-
-
-
Inc./(Dec.) in loans
-
-
-
-
-
-
Dividend Paid (Incl. Tax)
(88)
(104)
(104)
(104)
(104)
(88)
Others
218
(397)
102
(136)
259
218
Cash Flow from Financing
130
(501)
(1)
(240)
155
130
Inc./(Dec.) in Cash
195
(164)
204
249
488
195
Opening Cash balances
234
429
264
469
718
234
Closing Cash balances
429
264
469
718
1,206
429
October 30, 2015
8
Sanofi India | 3QCY2015 Result Update
Key ratios
Y/E Dec.
CY2011
CY2012
CY2013
CY2014
CY2015E CY2016E
Valuation Ratio (x)
P/E (on FDEPS)
51.4
55.4
40.9
49.8
36.0
28.1
P/CEPS
44.2
36.8
27.4
27.2
25.7
21.3
P/BV
8.8
8.2
7.3
6.6
5.3
4.2
EV/Sales
7.8
6.3
5.6
5.0
4.4
3.6
EV/EBITDA
54.4
40.4
32.3
39.5
25.1
17.4
Per Share Data (`)
EPS (Basic)
83.0
76.9
104.1
85.6
118.2
151.5
EPS (fully diluted)
83.0
76.9
104.1
85.6
118.2
151.5
Cash EPS
96.5
115.9
155.4
156.7
165.5
200.0
DPS
33.0
33.0
33.0
33.0
33.0
33.0
Book Value
484.9
522.9
584.8
645.2
808.4
1,004.9
Returns (%)
RoCE (Pre-tax)
13.5
12.1
15.7
10.2
18.5
27.9
Angel ROIC (Pre-tax)
23.6
17.5
22.4
14.6
26.4
39.8
ROE
17.9
15.3
18.8
14.4
19.9
25.5
Turnover ratios (x)
Inventory / Sales (days)
69
61
31
28
26
23
Receivables (days)
19
23
9
8
7
7
Payables (days)
48
44
24
21
20
18
October 30, 2015
9
Sanofi India | 3QCY2015 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
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Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from
or in connection with the use of this information.
Note: Please refer to the important ‘Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the
latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may
have investment positions in the stocks recommended in this report.
Disclosure of Interest Statement
Sanofi India
1. Analyst ownership of the stock
No
2. Angel and its Group companies ownership of the stock
No
3. Angel and its Group companies' Directors ownership of the stock
No
4. Broking relationship with company covered
No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
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)
October 30, 2015
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