Technology

Sanofi India (Sanofi) posted a robust set of numbers for 2QCY2016. It posted a
9.9% yoy growth in sales to Rs565cr, although the same are lower than our
expectation. The bottom-line came in higher than our expectation on the back of
a 30.5% surge in other income during the quarter. On the operating front, the
company reported a gross margin of 50.5% V/s 48.3% in 2QCY2015, which
resulted in an OPM of 18.2% V/s 16.7% in 2QCY2015. The proportionate
expansion in the OPM was less than that in the gross margin as other expenses
rose by 15.6% yoy during the quarter. The net profit for the quarter came in at
`85.3cr V/s Rs64.2cr in 2QCY2015. We maintain our Neutral rating on the
stock.
Sales underperform: For the quarter, the company posted sales of Rs565cr, a yoy
growth of 9.9%. Gross margin stood at 50.5% V/s 48.3% in 2QCY2015, which
enabled the company to post an OPM of 18.2% V/s 16.7% in 2QCY2015. The
proportionate expansion in the OPM was less than that in the gross margin, as
other expenses rose by 15.6% yoy during the quarter. Expansion in OPM along
with a 30.5% yoy growth in other income aided the net profit to come in at
Rs85.3cr V/s Rs64.2cr in 2QCY2015.
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 Rs169.2 over CY2015–17E. At the current
levels, the stock is trading at 29.9x and 27.1x its CY2016E and CY2017E
earnings, respectively. Given the fuller valuations, we recommend a Neutral rating
on the stock.

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