Sanofi SA 

Sanofi SA (LON: 0O59) is a global biopharmaceutical Company, which focuses on human health. The Company is transforming scientific innovation into healthcare solutions around the globe.

The Company will release Q1 FY2021 results on 28 April 2021.

Investment Highlights - Sanofi SA – Buy at EUR 80.09

• The Company has shown improvement in revenue and profitability for Q4 and FY2020 on a CER basis, driven by strong sales performance from Specialty Care and Vaccines.
• In the last one month, the Company delivered a decent return of ~ 2.85% and delivered a significantly higher return compared to the benchmark Index (FTSE-All share Index).
• Over the course of 4 years (FY16 – FY20), the Company’s operating profit surged from EUR 6,531 million in FY2016 to EUR 14,141 million in FY2020. Compounded annual growth rate (CAGR) stood at ~ 21.3%.
• From the technical standpoint, shares were trading above the short-term support level of 10-day (EUR 79.19) simple moving average prices, which reflects an uptrend in the stock.

Key Risks

• The COVID-19 pandemic may reduce the sales in targeted markets due to fewer promotional activities and lower healthcare spending on other diseases and could, therefore, significantly impact the business operations.
• Fluctuation in foreign exchange rates could affect the operational performance of the Company.

Financial Highlights – Q4 and FY2020 (31 December 2020) (released on 5 February 2021)

(Source: Quarterly Report, Company Website) 

• In the fourth quarter and financial year 2020, driven by strong Dupixent® performance and growth in demand for differentiated influenza vaccines, the sales increased by 4.2% and 3.3%, respectively, on constant exchange rate.
• The Company’s business EPS (earnings per share) surged by 3.9% and 9.2% on reported and CER basis, respectively.
• The Company reported a cost savings of €1,680 million in the financial year 2020 and around 60% were reinvested.
• The board proposed an annual dividend of €3.20.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: Price/Earnings (NTM) (Illustrative)

Conclusion

The Company has shown an increase in financial performance in the fourth quarter and the financial year 2020. Both the top-line and the bottom-line performance improved on a CER basis, with higher profitability margins. Sanofi delivered growth in earnings per share of 9.2% and was ahead of set guidance of 7% to 8% for FY2020 on constant exchange rates. The Company expects business EPS for FY2021 to show growth of high single-digit on a CER basis. The Company expects currency impact on business EPS to be in between -4.5% to -5.5%, based on average exchange rates for January 2021. The Company remained focused on executing on strategic priorities and strengthened R&D pipeline. The stock made a 52-week low and high of EUR 67.78 and EUR 95.79, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Buy” recommendation on Sanofi SA at the current price of EUR 80.09 (as on 9 February 2021, before the market close at 9:30 AM GMT), with lower double-digit upside potential based on 14.96x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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