Broker's call: Sanofi India (Add)

| Updated on February 26, 2020 Published on February 27, 2020

Centrum Broking

Sanofi India (Add)

CMP: ₹7,114.3

Target: ₹7,680

Sanofi India delivered quarterly earnings ahead of our estimates. The quarter reported revenue growth of 14 per cent y-o-y. We believe this could be largely driven by export push assuming domestic business at 9 per cent growth on December MAT basis along with weak base. In full year CY19, we expect the full year growth share of export business around 30 per cent with mid teen growth number.

Sanofi divested its Ankleshwar facility to Zentiva for ₹262 crore. This divestment concluded the export agreement with Zentiva, which was valid till 2023. Expected average revenue loss of ₹470 crore a year due to this contract dismissal. Management intends to mitigate this revenue loss by focussing on its core activities and brands. Also, the plant produced domestic sales which could transfer to third party manufacturers.

The management has declared dividend of ₹346 a share including one-time special dividend of ₹246 a share. The cash balance as on December 2019 is ₹1,130 crore. The one-time special dividend would drive higher return ratios for the company going ahead. We are aligning Sanofi’s multiple in-line with its peers at 33x CY21E, we have accordingly revised our recommendation to ‘Add’ with a target price of ₹7,680.

Published on February 27, 2020
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