Sanofi is a strong buy at rs 4,400

The Sunday Guardian - - & Comment Analysis - RA­JIV KAPOOR

Sanofi In­dia is part of the French phar­ma­ceu­ti­cal multi­na­tional com­pany Sanofi SA. It is en­gaged in the dis­cov­ery, de­vel­op­ment and marketing of pre­scrip­tion drugs and vac­cines for the treat­ment of dis­eases in ar­eas of cardiology, di­a­betes and the cen­tral ner­vous sys­tem. In the con­sumer health­care port­fo­lio, Sanofi In­dia has added a top­i­cal anal­gesic prod­uct by the name of Comb­i­flam in the pain care seg­ment. This over the counter prod­uct is avail­able in both the gel and spray seg­ment. The com­pany’s 18 ma­jor brands con­trib­ute to 70% of the to­tal rev­enues, as most of th­ese are in the life­style seg­ment. Sanofi In­dia drives 27% of its rev­enue from ex­ports to global lo­ca­tions like Hong Kong, Aus­tralia, Rus­sia, Malaysia, Sin­ga­pore and Thai­land. Most phar­ma­ceu­ti­cal an­a­lysts do not ex­pect any down­side risk, as all the ma­jor brands are al­ready under price con­trol and are gain­ing good vol­ume growth. The pace of steady growth con­tin­ues for the com­pany in the cur­rent cal­en­dar year also. Dur­ing the first three quar­ters from Jan­uary to Septem­ber 2017, Sanofi In­dia has earned a net profit of Rs 250 crore, on a to­tal sales turnover of Rs 1,695 crore. We be­lieve that Sanofi In­dia should re­port su­pe­rior per­for­mance in the fu­ture on the back of strong MNC parent­age, pro­vid­ing ac­cess to in­no­va­tive mar­kets, for­mi­da­ble brands in the do­mes­tic mar­ket, pro­vid­ing com­pet­i­tive ad­van­tage, re­cov­ery in mar­gins, in­tro­duc­tion of new prod­ucts and higher ex­ports. The prof­itable prod­uct mix, re­cov­ery in mar­gins and cost con­trol mea­sures should im­prove profit mar­gins sig­nif­i­cantly over the next few years. The Sanofi In­dia stock cur­rently trad­ing at Rs 4,400 is a strong fun­da­men­tal buy, with a price tar­get of Rs 4,900 in six months’ time hori­zon. SBI Life In­sur­ance is a joint ven­ture be­tween largest lender SBI and BNP Paribas Cardif which went pub­lic last month on the In­dian bourses with a US $1.3 bil­lion ini­tial pub­lic of­fer­ing. Re­cent me­dia re­ports throw an in­sight into their in­vest­ment phi­los­o­phy and equity pref­er­ence. While ma­jor­ity of its to­tal in­vest­ment is in debt se­cu­ri­ties, bal­ance has found al­lo­ca­tion in met­als and the oil and gas sec­tor stocks. The man­age­ment feels that strong re­fin­ing mar­gins of oil and gas com­pa­nies and the gov­ern­ments push to en­cour­age use of gas as a cleaner fuel will drive earn­ings sig­nif­i­cantly. Fur­ther rise in prices of base met­als such as alu­minium and zinc, in­crease in steel prices and im­prove­ment in re­fin­ing mar­gins of oil com­pa­nies should fuel a rally in com­mod­ity stocks from the present lev­els. Strong willed in­vestors can in­vest a small por­tion of their port­fo­lio in se­lect com­mod­ity stocks of their choice for smart gains in the next two quar­ters. Ra­jiv Kapoor is a share bro­ker, cer­ti­fied mu­tual fund ex­pert and MDRT in­sur­ance agent.

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