hem securities ltdlantus®, combiflam®, amaryl® and allegra® feature in the top 100...

For Private Circulation Only Hem ResearchResearch Analyst :Astha Jain

HEM SECURITIES LTDBuilding your wealth through values

HEM Securities Ltd.

Stock Coverage

Hem Research

HEM Securities Ltd.For Private Circulation Only

SANOFI INDIA LIMITED

Company is amongst the leading multinational companies in the Indian PharmaceuticalMarket. It offers a wide array of medicines for therapy areas such as Diabetes, Cardiology,Thrombosis, Central Nervous System and Antihistamines. The products manufactured bythe Company are distributed in India and exported to 51 countries (in CY17), withGermany, Australia, UK, Russia, Czech Republic and Italy ranking as the main markets.The key products exported by the Company in terms of formulations are, Paracetamol andCodeine tablets, Metformin tablets, Festal Dragees, and API's namely Pentoxyfylline andArticaine HCL.In Indian markets, company ranks at number 18 as per IMS TSA MATDecember 2017 and enjoys a market share of over 1.7%. Four products of company viz.Lantus®, Combiflam®, Amaryl® and Allegra® feature in the top 100 pharmaceuticalbrands in India.

Strong Financial Performance: Co’s financial performance was very strong withvery strong margin ratios. In Q2CY18 topline of company has posted growth of approx.14% while bottomline of company has posted decent growth of 35% on YoY basis. In sameqtr, co’s margin ratio has witnessed double digit growth with operating profit marginstanding at 24.06% which was at 19.21 % in Q2CY17.Also, net profit margin of companyregistered whopping growth of almost 19% as it stands at 14.57% in Q2CY18 against12.27% in Q2CY17.

Strong growth in key brands: Co’s key brands in Diabetes Therapeutic segment haswitnessed double digit growth in value terms ratio CY17. Brands like Lantus, Amaryl,Insuman, Apidra has registered growth 24%, 17%,19% & 23 % respectively in CY17 on YoYbasis. Company in order to expands its consumer healthcare portfolio has introduced anew addition in the pain-care segment - Combiflam® ICYHOT™, a topical analgesic. Thebrand has started registering a positive trend in the market from trade as well asconsumers.

ValuationThe company is currently trading at 40.50x of TTM eps of Rs 162.57 while it is trading at38.36x of CY18E eps & 32.60x of CY19E eps. Company is expected to benefit fromincreasing affordability among the fast growing middle class coupled with improvingmedical infrastructure and rising insurance penetration , better diagnosis of chronic, non-communicable diseases (like cardiovascular diseases, respiratory diseases and type-2Diabetes). & new product launches like Combiflam® ICYHOT™ .Also company’s keybrands like Lantus, Allegra , Cardace are expected to retain strong market share goingforward. Hence ,we recommend “Buy” on the stock with price target of Rs 7480.00 forlong term horizon.

CMP (07th Sep 2018) 6584.10

Target 7480.00

BSE CODE 500674

NSE CODE SANOFI

MARKET CAP (RS Cr) 15143.43

52 WEEK HIGH/LOW 6680/3945.50

INDUSTRY Pharmaceuticals

FACE VALUE Rs 10/share

SHARES O/S (IN NO) 2.30 Cr

EPS 162.57

BOOK VALUE 896.52

P/E 40.50

P/B 7.34

BUY

Sensex Sanofi

Hem Research


Therapeutic Areas

Diabetes: Company is one of the leading companies in Diabetes care with a significant presencein Insulins and oral anti diabetic drugs. Co’s flagship brands like Lantus® and Amaryl®, touchlives of nearly 2 million people in India, who are diagnosed with Diabetes.The insulin portfoliohas continued to grow double digits with its presence in Basal and Premix categories. The oralanti-diabetic drug portfolio has continued to grow with an established brand like Amaryl® aidedby the strong performance of the line extensions like Amaryl® M and Amaryl® MV. Lantus®grew by 24% in value terms. It continues to be the number 1 brand in the Basal analog insulinsmarket. Insuman® cartridges grew at 19% in value terms and Apidra® grew at 23% in valueterms.TM Allstar pens, indigenously manufactured by company, have helped initiation ofpatients on the insulin portfolio. Amaryl® group continued to grow in value terms by 17%,strongly supported by Amaryl M (21%), Amaryl MV (40%).

Cardiology : Company is present in anti-hypertensive drugs like Angiotensin ConvertingEnzyme Inhibitors (ACEi), Diuretics and Angiotensin Receptor Blockers (ARB). Cardace® group,the flagship brand, grew in volumes and continues to be the number 1 ACE Inhibitor prescribedby Cardiologists, Diabetologists and Consulting Physicians.Company is present in Thrombosis and high-end injectable anti-infective categories. Clexane®continues to be the trusted brand of Anticoagulants by retaining the number 1 position in Indianmarket despite 2017 being a highly challenging year due to the full year impact of price cutsimposed by DPCO. Targocid® is a high end antibiotic used in critically ill patients with resistantgram positive infections and is the number 1 brand in this category.

CNS: In the anti-epilepsy market, Frisium® grew 12% in volumes post the DPCO mandatedprice cut in 2016.

Consumer Healthcare: Company acquired the Nutraceutical portfolio of Universal Medicarein 2011. In 2017, company restructured this business and created four verticals i.e. Vitamins,Minerals & Supplements (VMS); Pain relief; and Allergy, Cough & Cold in order to have TM TMstrategic focus on key brands like Collaflex®, FreeFlex , DePURA by Sanofi , E Cod Plus®,Multivite Gold® in VMS, Combiflam® in Pain relief, Allegra® group in Allergy, Cough and Cold.Collaflex Pro® has grown 23% in value terms by driving the concept of long term joint healththrough scientific programs such as Knee Academy.


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India 74%

Outside India 26%

CY 17 Sales Breakdown

Material45%

Depreciation 5%

Corporate Taxes 8%

Staff Cost16%

General 26%

Revenue Distribution CY 17

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Key Brands

Therapy Brands Growth% In Value in CY17 (YoY)Diabetes Lantus® 24%

Amaryl® 17%Insuman® 19%Apidra® 23%

Cardiology Cardace® --

Consumer Healthcare Collaflex Pro® 23%Primosa® 4%

DePura 49%Combiflam® (5%)

Allegra® 10%

Sanofi Genzyme, the specialty care global business unit of Sanofi, has launched in India -Aubagio, from its international Multiple Sclerosis (MS) portfolio. A chronic and debilitatingdisease of the nervous system, Multiple Sclerosis has varied symptoms like weakness in thelimbs, poor vision, fatigue or slurred speech. Aubagio (Teriflunomide, 14 mg) is the firstoriginal ‘once-daily’ oral ‘disease modifying therapy’ (DMT) for Multiple Sclerosis to beapproved in India. It offers an effective, safe and a convenient option that is indicated as afirst-line treatment for relapsing forms of Multiple Sclerosis that must be taken once a day,with or without food. First approved by the US FDA in 2012, Aubagio has a strong globalpresence today with approvals in more than 81 countries. It has been extensively studied inmore than 5,500 patients with up to 13 years of clinical and follow-up studies with provenclinical efficacy, safety and tolerability outcomes. Globally, more than 85,000 patients withMultiple Sclerosis are benefitting from the use of Aubagio.

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Contd.


-7.59

50.11

-0.59

21.96

-5.38

7.17

-20.00

0.00

20.00

40.00

60.00

0

100

200

300

400

CY12 CY13 CY14 CY15 CY16 CY17

Net Profit

Net Profit Growth

-7.62

39.76

-19.78

30.65

24.44

24.51

-40.00

-20.00

0.00

20.00

40.00

60.00

0

100

200

300

400

500

600


EBIDTA

EBIDTA Growth

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Strong Manufacturing Capabilities

Sanofi continue to upgrade and strengthen manufacturing capacities andoperations supporting Indian and global markets. Capacity was increasedthrough automated system for granulation, compression, packaging lines as wellas upgradation was done by replacement of existing machinery with state of artand high-speed lines. Dual sourcing strategy was implemented in order toleverage the industrial footprint in India across sites and strategically allow sitesto be back-ups for each other. Such robust site network will provide theadditional flexibility for domestic volumes as well as higher exports volumes. Tocompliment higher volumes, warehouse and quality building remodeling arecurrently ongoing at Ankleshwar facility. Manufacturing sites have been gearingup for the serialization of packaging for European markets in 2019. The necessaryinvestments have been initiated and the project will be implemented by end of theyear 2018. Sanofi sites manufacture products with the stringent global qualityguidelines. The site holds various GMP accreditations as well as was recertifiedfor important regulatory agencies viz. US-FDA (for Chemistry), MHRA, Australia- TGA, state FDA, Russian MOH, NAFDAC, ANSM and EDQM. SuccessfulJapanese Inspection (PDMA) and Russian Inspection were completed atAnkleshwar Chemistry site. Sanofi’s manufacturing capabilities have deliveredcombine volumes of 10.5 billion galenic units of tablets and other dosageforms.Approx. 300 tons of API and intermediates were delivered in 2017. As apart of Sanofi Manufacturing System (SMS), Fit4future productivity initiativeswere launched, successfully implemented and extended at Ankleshwar site.Manufacturing facilities have successfully embraced SMS and Fit4futureprinciples to integrate the productivity into their way of working. Ankleshwarand Goa sites have also launched Quality focused improvement programs.AllPlants strictly adhere to Global safety and environmental norms and hold ISO14001 and BS OHSAS 18001 certifications

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18.36 19.2127.52 20.05 21.76 24.06

10.8512.27

17.42

11.3413.36

14.57

0

5

10

15

20

0

5

10

15

20

25

30

Q1CY17 Q2CY17 Q3CY17 Q4CY17 Q1CY18 Q2CY18

OPM % NPM %

0

100

200

300

400


Free Cash Flow ( In Rs Cr)

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Particulars CY15 CY16 CY17 CY18E CY19E

Net Sales 2193.10 2366.80 2463.60 2783.87 3201.45

Growth ( %) -- 7.92 4.09 13.00 15.00

Expenditure 1858.00 1949.80 1944.40 2171.42 2481.12

EBIDTA 335.10 417.00 519.20 612.45 720.33

Growth (%) -- 24.44 24.51 17.96 17.61

EBIDTA Margin (%) 15.28 17.62 21.07 21.99 22.50

Other Income 175.40 184.50 98.70 111.53 128.26

Depreciation 113.00 118.80 102.20 115.49 132.81

EBIT 397.50 482.70 515.70 608.49 715.78

EBIT Margin (%) 18.13 20.40 20.93 21.86 22.36

Interest 0.40 2.30 1.10 1.10 1.10

Exceptional Item 83.80 0.00 0.00 0.00 0.00

PBT 480.90 480.40 514.60 607.39 714.68

Tax 159.40 176.20 188.60 212.59 250.14

PAT 321.50 304.20 326.00 394.80 464.54

Min Int & Ass Sh 0.00 0.00 0.00 0.00 0.00

Consolidated PAT 321.50 304.20 326.00 394.80 464.54

Growth (%) --- (5.38) 7.17 21.10 17.66

NPM (%) 14.66 12.85 13.23 14.18 14.51

P&L A/C


EPS 139.78 132.26 141.74 171.66 201.97

ROCE(%) 24.43 25.63 25.45 26.87 27.83

ROE(%) 19.76 16.16 16.09 17.43 18.06

Book Value 707.43 818.70 881.04 984.57 1118.41

Debt/Equity 0.00 0.00 0.00 0.00 0.00

Ratios

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Balance SheetRs Cr



Sh Capital 23.00 23.00 23.00 23.00 23.00

Res & Surplus 1604.10 1841.50 1977.80 2215.91 2523.75

Sh App/Warrants 0.00 18.50 25.60 25.60 25.60

Minority Interest 0.00 0.00 0.00 0.00 0.00

Total Debt(Long

Term+Short Term

Borrowings)

0.00 0.00 0.00 0.00 0.00

Other Long Term

Liab & Provison

40.20 54.80 46.50 59.64 66.48

Net Deferred Tax

Liability

120.30 101.30 103.10 103.10 103.10

Sources Of Fund 1787.60 2039.10 2176.00 2427.25 2741.93

Net Fixed Assets 894.90 846.30 793.40 809.67 848.65

Non –Current

Investments

0.20 0.20 0.20 0.20 0.20

Intangible Assets 4.30 4.20 5.70 5.70 5.70

Other Non –Current

Assets

261.50 115.20 534.50 600.02 724.47

Total Current Assets 1243.70 1575.30 1443.20 1630.82 1875.44

Current Liabilities &

Provisions

617.00 502.10 601.00 619.15 712.52

Net Current Assets 626.70 1073.20 842.20 1011.67 1162.92

Uses Of Funds 1787.60 2039.10 2176.00 2427.26 2741.94

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Quarterly Financial Highlights

Particulars Q2 CY18 Q2CY17 Q1CY18 YoY % QoQ%

Net Sales 683.60 600.60 617.70 13.82 10.67

Total

Expenses

519.10 485.20 483.30 6.99 7.41

Operating

Profit

164.50 115.40 134.40 42.55 22.40

Net Profit 99.60 73.70 82.50 35.14 20.73

PBIDTM % 24.06 19.21 21.76 25.24 10.57

NPM % 14.57 12.27 13.36 18.73 9.06

EPS 43.30 32.04 35.87 35.14 20.71

Rs Cr

Promoter 60%

FII 12%

Others 28%

Shareholding Pattern as on June’18

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HEM SECURITIES LIMITEDMEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER

Sebi Registration No For Research Analyst: INH100002250

MUMBAI OFFICE: 904, A WING. 9TH FLOOR, NAMAN MIDTOWN, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, LOWER PAREL ,MUMBAI -400013

PHONE- 0091 22 49060000 FAX- 0091 22 2262 5991

JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757

GROUP COMPANIESHEM FINLEASE PRIVATE LIMITED

MEMBER-NSEHEM MULTI COMMODITIES PRIVATE LIMITED

MEMBER-NCDEX, MCXHEM FINANCIAL SERVICES LIMITED

NBFC REGISTERED WITH RBI

Hem Research


Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sourcesbelieved to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts areaccurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrumentand at any point should not be considered as an investment advice. Reader is requested to rely on his own decision and may take independentprofessional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited,Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees toexempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employeesfrom, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease PrivateLimited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages,expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers,directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long orshort positions in, and buy or sell the securities there of, company (ies) mentioned herein and the same have acted upon or used theinformation prior to, or immediately following the publication.

Disclosure of Interest Statement1. Analyst Ownership of the Stocks No2. Hem & its Group Company Ownership of the Stock Yes3. Hem & its Group Company Director Ownership of the Stock No4. Broking relationship with Company covered No

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and nopart of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and viewsexpressed by research analyst(s) in this report.

hem securities ltdlantus®, combiflam®, amaryl® and allegra® feature in the top 100...

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