Motilal Oswal
Sanofi India (Buy)
CMP: ₹5,972.1
Target: ₹7,000
Growth was largely driven by volumes. Growth in Chronic segment (contributed around half of sales) exceeded that in Acute segment. Sanofi India’s secondary sales grew 12 per cent y-o-y (industry growth: 9.5 per cent y-o-y), led by the anti-diabetic portfolio (+26 per cent y-o-y; about 28 per cent of sales). Lantus, its largest product, grew by about 32 per cent y-o-y. Gastrointestinal portfolio (9 per cent of sales) grew by about 61 per cent y-o-y for the quarter.
Enterogermina and Dulcoflex particularly grew sharply. Vaccines (about 13 per cent of sales)/ respiratory (about 11 per cent of sales) segments exhibited a decline, while cardiac (about 15 per cent of sales) showed subdued growth.
Secondary sales reflect the strong outperformance in anti-diabetic portfolio and healthy growth in respiratory portfolio. This implies that revenue blip in 4Q was only due to the high base and that growth in key therapies remains robust. Accordingly, we raise our CY19/20E EPS by about 1 per cent/3 per cent. We also roll to 32x (unchanged) 12-month forward earnings to arrive at a price target of INR7,000 (prior: ₹6,850). We remain positive on Sanofi India on the back of volume-led better-than-industry growth in the domestic formulation segment. Also, core brands such as Lantus, Allegra, Combiflam and Hexaxim continue commanding superior market shares in their respective categories. Maintain ‘Buy’.