Though the results were below estimates, analysts believe that revenues and margins will improve going ahead, led by top brands, new launches, and a better product mix. Analysts also expect the company to post more than 10 per cent growth in revenue over the next couple of years, with net profit growing at double the level of sales.
Analysts at Nirmal Bang Institutional Equities Research expect profit to outpace revenue growth, as the high-margin portfolio is expected to grow faster than the rest of the business. The key growth drivers include its insulin portfolio (led by flagship brand Lantus), next-generation insulin (Toujeo), Allegra and the recently launched Combiflam topical pain relief gel/spray.
In addition to volume growth of existing brands, price hikes on drugs that are not under drug control should help boost sales. About two-thirds of Sanofi’s revenues come from its top 18 brands.
In addition to the strong growth prospects on account of its presence in chronic therapies that constitute half of sales, the Street is bullish on the company, given its attractive valuations.
At the current price, the stock is trading at 16 times its CY20 estimates. This is at a 30-40 per cent discount to multinational peers such as GlaxoSmithKline Pharma.