Sanofi SA 

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

The Company will release Q4 and FY2020 results on 5 February 2020.

Investment Highlights - Sanofi SA – Buy at EUR 83.17

• The Company has shown improvement in revenue and profitability for Q3 FY2020 on a CER basis, driven by strong sales performance from Specialty Care and Vaccines.
• In the last one week, the Company delivered a decent return of ~ 8.44% and delivered higher returns compared to the benchmark Index (FTSE-All Share Index).
• Over the course of 4 years (Q3 FY16 – Q3 FY20), the company’s net profit surged from EUR 1,674 million in Q3 FY16 to EUR 1,952 million in Q3 FY20, the growth trajectory of ~3.92 per cent.
• From the technical standpoint, 90-day RSI is currently supporting an upside move (around 49 level), which means the stock price could increase in the short term.

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.

Recent News

On 2 November 2020, Sanofi announced that it has entered into a definitive agreement with Kiadis, a clinical-stage biopharmaceutical company. As per the agreement, Sanofi will make a public offer to acquire Kiadis’ entire share capital for EUR 5.45/share or €308 million of an aggregate adjusted equity value.

Financial Highlights – Q3 FY2020 (30 September 2020) (released on 29 October 2020)

• In the third quarter of the financial year 2020, net sales surged by 5.7% on the constant exchange rate, driven by strong flu vaccines and Dupixent® vaccines demand.
• The Company delivered net income and EPS growth of 9.4% and 8.8%, respectively, on the constant exchange rate for the period, driven by strong sales performance and efficiencies.
• Sanofi is focused on delivering on R&D, with the addition of 7 new Phase 3 programs to immunology and oncology pipelines.
• The Company fully enrolled Phase 1/2 trial for the adjuvanted recombinant protein-based vaccine for covid-19.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown an increase in financial performance in the third quarter of the financial year 2020. Both the top-line and the bottom-line performance improved on a CER basis, with higher profitability margins. Sanofi expects growth in earnings per share between 7% to 8% for FY2020 on constant exchange rates. The Company expects EPS to be in between -6% to -7%, based on average exchange rates for October 2020. The Company remained focused on executing on strategic priorities and strengthened R&D pipeline. Sanofi has fast-tracked the development of covid-19 vaccines and signed pre-orders with major countries, non-profit organizations and regions. 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 83.17 (as on 9 November 2020, before the market close at 10:15 AM GMT), with lower double-digit upside potential based on 16.08x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.).

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

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