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Sanofi India
Performance Highlights
Y/E Dec. (` cr) Net sales Other income Operating profit Net profit 1QCY2013 363 42 47 44 4QCY2012 401 38 51 45 % chg (qoq) (9.4) 8.6 (6.5) (1.1) 1QCY2012 323 29 49 40 % chg (yoy) 12.5 43.6 (3.7) 10.5
NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Pharmaceutical 5,884 (409) 0.4 2,899 / 2002 1,967 10 19,504 5,930 SANO.BO SANL@IN
`2,555 -
For 1QCY2013, Sanofi India reported results lower than expectations, both the on top-and bottom-line fronts. Sales grew by 12.5% yoy; however the net profit grew by just 10.5% yoy, due to lower-than-expected OPM. Given the valuations, we recommend a Neutral rating on the stock. Below-expectation results: Sanofis net sales grew by 12.5% yoy to `363cr for 1QCY2013, lower than our estimate of `401cr. The company reported a gross margin of 51.8% (50.9% in 1QCY2012), higher than our estimate of 49.5%. However, the OPM came in at 13.1%, lower than our estimate of 14.6%, due to a higher rise in other expenses, which rose by 28% yoy. The net profit came in at `44cr, up by 10.5% yoy, lower than our estimate of `50.1cr. Outlook and valuation: We expect net sales to post a 13.3% CAGR to `1,917cr and EPS to register a 13.4% CAGR to `99.1 over CY201214. At current levels, the stock is trading at 27.6x and 25.8x CY2013E and CY2014E earnings, respectively. We recommend a Neutral rating on the stock. Key financials
Y E Dec (` cr) Net Sales % chg Net Profit % chg EPS (`) EBITDA(%) P/E (x) RoE (%) RoCE (%) P/BV (x) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 60.4 19.8 14.5 5.3
3m (2.5) 12.7
CY2011 1,230 13.3 191.7 23.7 83.2 14.3 30.7 18.0 13.5 5.3 4.6 32.1
CY2012 1,494 21.5 177.3 (7.5) 77.0 15.6 33.2 15.3 12.1 4.9 3.7 23.4
CY2013E 1,682 12.6 212.8 20.1 92.4 16.6 27.6 15.7 13.2 3.9 3.1 18.8
CY2014E 1,917 14.0 228.1 7.2 99.1 16.6 25.8 14.8 12.5 3.9 2.6 15.4
CY2011 1,230 139 1,369 176 14.3 0 31 284 0 284 93 191 83.1
18 59 0 59 19 40 17.4
Actual
Estimates
Variation (%)
363 42 47 21 44
401 38 59 24 50
374 323
397
401 363
OPM declines by 219bp: The company reported a gross margin of 51.8% (50.9% in 1QCY2012), higher than our estimate of 49.5%. However, the OPM came in at 13.1%, lower than our estimate of 14.6%, due to a higher rise in other expenses, which rose by 28% yoy.
(%)
4QCY2012
1QCY2013
Bottom-line below estimates: The net profit came in at `44cr, up 10.5% yoy, lower than our estimate of `50.1cr.This was mainly on account of lower-than-expected OPM during the quarter.
(` cr)
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 is the second largest MNC in India, enjoying a market share of 1.4%.
Recommendation rationale
Focus on top-line growth: Sanofi recorded a revenue CAGR of 9.1% to `1,494cr over CY200612 on the back of slower-than-expected growth on the domestic formulation front and loss of distribution rights of Rabipur vaccine. Going forward, to grow in line with the industrys average growth rate in the domestic segment, Aventis has rolled out its Prayas project, an initiative to increase its penetration in rural areas. Under the project, the company would launch low-price 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 has acquired the nutraceutical business of Universal Medicare Pvt. Ltd, which aids the companys foray into the nutarceutical business, thus aiding it in diversifying, and boosting overall growth of its domestic formulation business. We expect the companys net sales to log a 13.3% CAGR over CY201214, majorly driven by its domestic formulation sales. Valuation: We expect net sales to post a 13.3% CAGR to `1,917cr and EPS to register a 13.4% CAGR to `99.1 over CY201214. At current levels, the stock is trading at 27.6x and 25.8x CY2013E and CY2014E earnings, respectively. We recommend a Neutral rating on the stock.
(` cr)
May-07 Jul-07 Sep-07 Dec-07 Feb-08 May-08 Jul-08 Oct-08 Dec-08 Mar-09 May-09 Aug-09 Oct-09 Jan-10 Mar-10 Jun-10 Aug-10 Nov-10 Jan-11 Mar-11 Jun-11 Jul-11 Oct-11 Dec-11 Mar-12 May-12 Jul-12 Oct-12 Dec-12 Mar-13
Price 10x 15x 20x 25x
Balance sheet
Y/E Dec. (` cr) Equity share capital Reserves & surplus Shareholders funds Long term provisions Other long term liabilities Total loans Total liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net block Goodwill Capital Work-in-Progress Long term loan and advances Investments Current assets Cash Loans & advances Other Current liabilities Net current assets Deferred tax assets Total assets 335 190 145 27 5.2 1,014 586 144 284 274 740 15 932 375 204 171 13 0.4 1,214 655 257 302 394 820 10 1,014 955 225 730 30 75 0.4 667 234 174 327 357 310 (8) 1,137 959 256 703 40 58 0.4 832 429 208 394 387 446 (21) 1,226 989 354 635 40 58 0.4 1,313 636 234 443 435 877 (21) 1,533 1,019 454 565 40 58 0.4 1,449 678 266 505 496 953 (21) 1,538 CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E 23 909 932 932 23 991 1,014 1,014 23 1,094 1,117 1 19 1,137 23 1,181 1,205 20 1,226 23 1,489 1,513 20 1,533 23 1,811 1,517 20 1,538
Key ratios
Y/E Dec. Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV EV/Sales EV/EBITDA Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) RoCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Inventory / Sales (days) Receivables (days) Payables (days) 72 25 49 75 18 47 70 19 48 65 19 49 32 9 24 32 9 21 14.8 40.5 17.9 12.6 36.9 15.9 13.5 23.8 18.0 12.1 17.6 15.3 13.2 22.5 15.7 15.9 22.7 16.7 68.4 68.4 75.9 20.0 404.6 67.3 67.3 109.1 55.0 440.3 83.2 83.2 96.7 33.0 484.8 77.0 77.0 116.0 33.0 523.3 92.4 92.4 134.7 35.1 656.7 99.1 99.1 142.6 35.1 658.8 37.4 33.7 6.3 5.4 35.9 38.0 23.4 5.8 4.8 36.5 30.7 26.4 5.3 4.6 32.1 33.2 22.0 4.9 3.7 23.4 27.6 19.0 3.9 3.1 18.8 25.8 17.9 3.9 2.6 15.4 CY2009 CY2010 CY2011 CY2012 CY2013E CY2014E
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
Sanofi India No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors.
Ratings (Returns):
10