Target: ₹6,580
CMP: ₹5,862.35
Sanofi’s Q4-CY22 revenue and PAT came above our estimates. Revenue at ₹580 crore declined by 2 per cent y-o-y and 3 per cent q-o-q, due to the divestment of Universal Medicare business and two brands Soframycin + Sofradex (part of base biz till last year).
Gross margin improvement by about 300bps y-o-y mainly driven by a favorable mix at 58.2 per cent. EBITDA margin improved by 635bps on y-o-y at 24.8 per cent on lower overheads cost. Furthermore, the adjusted PAT increased by 29 per cent y-o-y to ₹120 crore led by better operating performance and lower input and overheads cost.
The long overhand on the stock appears to get over as Sanofi’s largest product Lantus came under the revised list of NLEM, which we believe to have less incremental risk on its earnings. However, near-term impact remains on its earnings.
Sanofi aims to accelerate growth in its diabetes portfolio, and is focusing on selective brands. Its established presence in the chronic therapies, likely growth in insulin products and portfolio expansion in cardiology could also add to the growth ahead.
The stock corrected about 30 per cent in 1 year, which provide attractive valuation.