Strong growth track record in top brands and capability of new launches (including innovative launches) are some key attributes of MNC pharma companies including Sanofi. The issues like NLEM and other regulatory aspects are mostly in the price. On the flip side, looming threat of Jan Aushadhi and trade generics are some head winds at this juncture. On the exports front, five year supply agreement as per Sanofi- Advent deal bodes well for the company to maintain growth tempo (CY14-18 CAGR of 14%). We arrive at a target price of Rs 7500 based on 35x FY21 EPS of Rs 214.
We expect SIL’s revenues to clock 9.26% revenue CAGR while net earnings should grow 17.7% over CY18-CY20E. Earnings growth should outpace revenue growth as the high- margin portfolio is growing faster than the rest of the business. The key growth drivers for the company include its insulin portfolio (led by flagship brand Lantus), next generation insulin (Toujeo), Allegra and recently launched Combiflam topical pain relief gel/spray. Owing to the recent run up in SIL stock price, we recommend an accumulate rating on SIL with a target price of Rs6,471.