Technology

Sanofi India (Sanofi)’s 1QCY2016 results have come in lower than our
expectation; the company posted a 10.1% yoy growth in revenue to Rs506cr V/s
an expected Rs593cr. On the operating front, the gross margin came in at 52.1%,
almost in line with our expectation, and V/s 47.8% in the corresponding period
of last year. The OPM came in at 18.0% V/s an expected 20.0% and V/s 11.7%
in the corresponding period of last year. Consequently, the PAT came in at Rs81cr
(V/s an expected Rs88cr), a yoy growth of 67.9%. We recommend an Accumulate
rating on the stock.
Lower-than-expected results: The company posted a 10.1% yoy growth in
revenue to Rs506cr (V/s an expected Rs593cr). We expect revenue growth to
sustain in the coming quarters with improvement in volumes along with likely
price hikes in DPCO products. On the operating front, the gross margin came in
at 52.1%, almost in line with our expectation, and V/s 47.8% in the
corresponding period of last year. The OPM came in at 18.0% V/s an expected
20.0% and V/s 11.7% in the corresponding period of last year. Consequently,
the PAT came in at Rs81cr (V/s an expected Rs88cr), a yoy growth of 67.9%. Tax as
% of PBT was 35.3% V/s 26.5% in 1QCY2015. Other income for the quarter
grew 30.0% yoy to Rs64cr.
Outlook and valuation: We expect net sales to post a 14.6% CAGR to Rs2,692cr
and EPS to register a 21.2% CAGR to `169.2 over CY2015–17E. At current
levels, the stock is trading at 28.7x and 26.1x its CY2016E and CY2017E
earnings, respectively. Given the valuations, we recommend an Accumulate rating
on the stock.

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