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ICICI Securities Report
Sanofi India Ltd.’s Q2 CY22 performance was below our estimates on the profitability front. Revenues declined 11.4% YoY to Rs 7.0 billion (our estimate: Rs 7.1 billion) due to divestment of the nutraceutical business and brands.
Ebitda margin contracted 830 basis points YoY and 450 bps QoQ to 23% (our estimate: 26.5%) due to negative operating leverage and fixed costs amidst lower revenues.
In the past few years, the company’s growth and profitability were fuelled by power brands. We remain positive on Sanofi India given its high exposure in the fast-growing chronic therapy in domestic formulations, strong balance sheet with deep cash reserves, and strong brand equity built over the years.
While we expect near-term performance to be modest, the recent correction in stock price (~10% in past six months) keeps valuations reasonable.
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