Sanofi is a strong buy at Rs 4,400

Sanofi is a strong buy at Rs 4,400

By Rajiv Kapoor | 26 November, 2017

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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