Analysts slash Sanofi target over Ankleshwar plant sale

Sanofi India’s sale of its Ankleshwar facility to Zentiva for ₹262 crore did not go down well with analysts who said that the divestment value which is 0.6 times the impacted sales is very low. Ascribing such low valuations to productive assets are unexplainable, said Cyndrella Carvalho, analyst at Centrum Broking while reducing the target price of the stock from ₹6,000 to ₹5,600. The stock ended flat at ₹5,928 on Friday.

Sanofi India said that the divestment would lead to average revenue loss of ₹470 crore per annum for the remaining four years out of the five-year contract. The company intends to mitigate this revenue loss by focusing on its core activities and brands. “This contract had a commitment of four more years of sales. If we include that then the received compensation looks more miniscule” said Carvalho.

Sanofi has been continuously investing into the Ankleshwar and Goa facilities to support global supplies to group companies. Major investments were carried out in CY13-15. At the current market price of ₹5,929, the stock trades at 32.5 times its CY19 estimated EPS of ₹182.6 and 27.6 times CY20 estimated EPS of ₹218.5. After the adjustment of sale of the Ankleshwar plant, analysts have lowered earnings estimates for CY20 by 9 per cent.