Sanofi's valuations attractive: Should you invest?

Chronic therapeutic treatments contribute around 63% of Sanofi India’s domestic sales and the same is now under several restrictions due to the Covid-19 related disturbances. The company’s growth opportunities should improve once the situation stabilises and patients start coming back to the hospitals for treatment of other diseases. Despite short-term challenges, Sanofi continues to do well and was able to beat the street expectations with its results for the first quarter of 2021. While its q-o-q revenue remained stable, its y-o-y revenue declined by 8%. However, this decline was due to the divestment of its Ankleshwar plant and discontinuation of a few products to Zentiva. Its adjusted revenue growth is placed at 9% y-o-y. Its qo-q gross margin which declined mostly because of the increased contribution from low margin imports was offset by operational cost savings. Its q-o-q ebitda and net profit grew by 13% and 19% respectively. 82342643 Despite being a mid-cap pharma company, analysts continue to impose their faith in Sanofi India due to its long term growth outlook. As per analysts’ estimate, Sanofi is expected to report around 4% revenue growth in 2021 despite divestment of Ankleshwar plant and discontinuation of supplies to Zentiva. Export to Zentiva had contributed around 15% of its sales in 2020. Sanofi management remains focussed on its long term goals of selective and profitable growth in established products and to build consumer healthcare. Sanofi’s power brands continue to do well and its flagship brands like Lantus (insulin), Toujeo (next generation insulin), Allegra, recently launched Combiflam topical pain relief gel and spray, etc are expected to drive its growth. Analysts believe that Sanofi’s net profit will grow faster in the coming years due to cost control measures adopted by the management. The benefits of lower promotional spends, which was visible in 2020, is expected to continue to some extent in 2021 as well. Its digital push is also getting root and this should help Sanofi to reduce selling expenses in the years to come. Sanofi is generating free cash flows now and the increased domestic contribution should lift its margin further. Recent under performance and the resultant lower valuation is another factor attracting analysts to this counter now. In addition to its strong parent, it can also boast of established brand franchises, healthy return ratios and high cash reservesSelection Methodology: We pick up the stock that has shown the maximum increase in “consensus analyst rating” during the last 1 month. Consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (ie 5 for strong buy, 4 for buy, 3 for hold, 2 for sell and 1 for strong sell) and any improvement in consensus analyst rating indicates that the analysts are getting more bullish on the stock. To make sure that we pick only companies with decent analyst coverage, this search will be restricted to stocks with at least 10 analysts covering it. You can see similar consensus analyst rating changes during the last one week in ETW 50 table.Graphics by Sadhana Saxena/ET Prime

from Economic Times https://ift.tt/2SpXdFr