Why invest in it
Focus on lifestyle drugs, super-hit brands
- Sanofi India (60% subsidiary of Sanofi Aventis, France) is the fifth largest MNC and among top 15 formulation players in India. Company has most of its products in lifestyle category - diabetes, cardiac, vaccines, respiratory and analgesics domains which are the fastest growing categories in India
- Strong MNC parentage providing access to innovative products
- Formidable brands in the domestic market, providing competitive advantage
- The company’s 18 major brands contributed ~70% to the revenues, as most of them are in the lifestyle segment.
- Most of its brands are leaders and are growing at industry beating rates like Lantus grew at ~25% in 2017-18 compared to market growth rate of ~3%, and that too despite being under price control!
Vaxigrip-flu vaccine brand is growing at over 30%
- SIL’s top seven power brands viz. Lantus (diabetes), Combiflam (analgesic), Hexaxim (vaccine), Allegra (respiratory), Amaryl (diabetes), Clexane (CVS/cardiac) and Avil (respiratory) contributes ~50% to the company’s domestic sales
- SIL’s six major brands – Lantus, Cardace, Amaryl, Clexane, Frisium and Avil – are under price control. Despite being under price control, they have shown good growth, due to the increase in affordability. We do not expect any downside risk from NPPA as all the major brands are already under price control and gaining good volume growth.
- New product introductions from parent company, line extension launches and higher exports will be key growth drivers
- Profitable product mix and cost control measures would improve margins
- Stock trades at 50% discount to GSK
- The company has maintained dividend payout in the range of 40-60% in the past five years
India – Diabetes and Heart Disease Capital of the World
Why the Company’s Business will Grow
Long Term Growth Drivers
Over 61 per cent of all deaths in India are due to lifestyle or non-communicable diseases (NCDs), most prevalent are - heart attack, diabetes, and high blood pressure. Not restricted to adults alone, lifestyle diseases have started hitting kids as well. The shift in purchasing power and the coming in of technology has changed the way our life functions now. Less physical activity, more availability of resources and no time to spare, we have become preys to some extremely uncommon diseases our grandparents had never even heard about back in the 60s and 70s.
India has the highest number of diabetics at 50.8 million according to the World Health Organization, though only 11% of the population has health insurance. This figure is set to increase to 73.5 million by 2025. Twenty-five million suffer from cardiovascular diseases which amount to 60% of the global figure. Overcrowding and bad living conditions also increase stress leading to coronary heart diseases, asthma and cancers. Urbanization makes for a sedentary life leading to greater obesity.
Companies making drugs for lifestyle diseases have bright long term future.
Launches of new products from its consumer healthcare portfolio (operates in four segments: pain-care, digestive health, allergy and vitamins, minerals supplements), along with brand extensions and access to innovative molecules from global parent under free licensing and continued domestic rural penetration strategies would create strong growth opportunities for the company
Immediate Growth Drivers
New product launches and price hikes of NLEM products (~25-28% of total sales) are expected to drive Sanofi’s topline growth.