Sanofi’s Q3CY20 revenues de-grew 11.9% YoY to Rs. 687 crore mainly due to the full impact of divesture of a few products to Zentiva (Ankaleshwar slump sale) and continued impact of Covid-19 on some therapies. EBITDA margins improved 547 bps YoY to 28.0% due to lower other expenditure, better gross margins. Subsequently, EBITDA grew 9.5% YoY to Rs. 192 crore. Reported PAT grew 5% YoY to Rs. 133 crore. Delta vis-a-vis EBITDA was due to lower tax rate in Q3CY19.

Valuation & Outlook

Despite Covid-19, the company posted a decent 9MCY20 operational performance with EBITDA growing 12.1% YoY to Rs. 546 crore mainly on the back of reduced other expenses (down 21% YoY) likely stemming from cost rationalisation, reduced marketing & promotional spends. Going ahead, we expect marketing spends to be lower than their historical trends on the back of higher adoption of digital marketing tools amid Covid-19. Sanofi remains one of the fastest growing companies in India in anti-diabetic therapy. It launched Toujeo within just three years of its launch in the US, which suggests it is prepared to launch core innovative products in India banking on growth prospects in the anti-diabetic category. A strong growth track in top brands, measured new launches (including innovative launches) besides strong balance sheet and comfort on corporate governance front are some key attributes of MNC pharma companies including Sanofi. We maintain BUY with a target price of Rs. 9820 (35x CY22E EPS of Rs. 280.5).

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Shares of Sanofi India Ltd was last trading in BSE at Rs.8250 as compared to the previous close of Rs. 8384. The total number of shares traded during the day was 459 in over 261 trades.

The stock hit an intraday high of Rs. 8450 and intraday low of 8231. The net turnover during the day was Rs. 3812604.

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