Sanofi India - March 2013 Results Preview - Motilal Oswal

- We expect Sanofi India's (SANL) top line to grow 23% YoY in 1QCY13E to INR3.96b, led by the domestic formulations business.

- EBITDA is likely to grow 27% YoY to INR624m, driven mainly by top line growth. EBITDA margin would expand 40bp YoY to 15.7% on lower other expenses.

- We expect PAT to grow 10% YoY to INR441m, despite better operational performance. This will be due to high depreciation expenses on account of a change in accounting policy for intangibles.

We believe SANL will be one of the key beneficiaries of the patent regime in the long term. The parent has a strong R&D pipeline, with 64 products undergoing clinical trials. Of these, 17 are in phase-III or pending approvals. Some of these are likely to be launched in India. However, SANL's profitability has declined significantly in the last five years. EBITDA margin has shrunk from 25% in CY06 to 15.6% in CY12, mainly impacted by discontinuation of Rabipur sales in the domestic market, lower export growth, and higher staff and promotional expenses. RoE has declined from 28.6% to 14.8%. The stock trades at 29.1x CY13E and 24.6x CY14E EPS. Our estimates do not factor the impact of proposed new pharma policy. We believe the stock's performance will remain muted until clarity emerges on future growth drivers. Maintain Neutral.

Source : Equity Bulls

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