Sanofi India: High-margin diabetic products and exports to drive profits

Though Sanofi India has gained over 62 per cent on the bourses over the last one year and is trading near its 52-week highs, there is more upside to the stock. This is because net profit growth for this pharma multinational is expected to outpace revenue growth, led by its high-margin portfolio of insulin products.
 
In addition to its insulin portfolio, growth drivers include its well-known brands in pain control, anti-allergic segments like Combiflam and Allegra, as well as its line extensions. Growth is expected to come from price hikes in the portfolio and improvement in volumes. Export revenues, which contribute about 26 per cent to overall revenues, are expected to benefit further from the rupee depreciation.
 
The Insulin portfolio, which accounts for more than a third of its branded prescription sales, is growing faster than the market — with products such as Amaryl, Lantus, Apidra and Insuman —say analysts. The company has launched line extensions such as Amaryl-M, and is expected to gain further from the launch of another insulin product Toujeo that is gaining traction. Portfolio growth should outpace the market, according to analysts at Nirmal Bang Research.

 
Key growth drivers for the company have remained its power brands such as Combiflam and Allegra, among others. The top seven brands have together grown at 21 per cent annually and now account for 46 per cent of Sanofi’s sales, as compared to 32 per cent in June 2014. This is despite four of the top seven brands being under price control.
 

Further, a 4 per cent hike in price from April, for 19 per cent of the company’s domestic portfolio currently under price control, could add to overall growth, say analysts at Elara Capital. The firm recently launched Combiflam topical pain relief gel/spray which, along with fast-growing brand Allegra, is expected to remain a growth driver. Analysts expect a fast ramp-up for Combiflam IcyHot driven by strong brand recall, aggressive advertising support and an established distribution network.

 
Ranjit Kapadia at Centrum Broking expects Sanofi to report superior performance in the future, led by its well-known brands in the lifestyle segment, new product introductions from the parent company, insulin pens, and line extensions. Analysts at Nirmal Bang Research expect Sanofi’s revenues to grow 11 per cent, and net profit to grow 24 per cent annually over calendar year 2017-20.