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Domestic business (ex-divestment) grows at 13% in CY21

About the stock: Sanofi offers drugs in therapies like diabetes (insulins & orals), cardiology, thrombosis, anti-infective, CNS, allergy, vitamins, minerals & supplements.

* Lantus, Allegra & Combiflam are in Top 100 pharmaceutical brands in India

* Sanofi is one of the fastest growing companies in India in anti-diabetic therapy

Q4CY21 Results: Sanofi India reported muted numbers this quarter. However, domestic business (ex-divestment) has grown 13% YoY in CY21.

* Revenues were down 4.5% YoY to | 687.9 crore

* EBITDA was at | 127.2 crore, down 23.8% YoY with margins at 18.5%

* Consequent adjusted PAT was at | 90.4 crore (down 21.5% YoY)

What should investors do? Sanofi’s share price has grown by ~1.7x over the past five years (from ~| 4161 in February 2017 to ~| 7184 in February 2022).

* Retain BUY rating on the stock due to strong chronic (anti-diabetic in particular) franchise and downsized portfolio to focus on margins

Target Price and Valuation: Valued at | 8965 i.e. 30x P/E on FY24E EPS on | 298.9

Key triggers for future price performance:

* Focus on leveraging high margin portfolio through divesture of lower margin product basket

* Strong balance sheet, good dividend payout track record and comfort on corporate governance

* Consistent performer in anti-diabetic and cardiac along with increasing contribution from respiratory, analgesics and gastro-intestinal therapies

* Future launches from its global staple along with brand extensions

* Access to innovative molecules from parent like anti-diabetic drug Toujeo

Alternate Stock Idea: Apart from Sanofi, among MNC coverage we like Abbott.

* Abbott India is one of the fastest growing listed MNC pharma companies in women’s health, GI, metabolic, pain, CNS among others. We continue to believe in Abbott’s strong growth track in power brands and capability in new launches on a fairly consistent basis

* BUY with target price of | 19840

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