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Published on 17/08/2022 12:55:09 PM | Source: ICICI Direct

Hold Abbott India Ltd For Target Rs.21140 - ICICI Direct

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Weak poultry performance continues to weigh on numbers

About the stock: Abbott India is one of the fastest growing listed MNC pharma companies. It has outperformed the industry on a consistent basis in women’s health, GI, metabolic, pain, CNS among othe

* The company’s top five brands - (Mixtard, Thyronorm, Novomix, Udiliv and Duphaston) together posted revenue CAGR of ~6.6% MAT, March 2019-22

* Abbott has 140+ brands in segments of women’s health, gastroenterology, metabolics, CNS, multi-specialty, vaccines & consumer healthQ1FY23 Results: Numbers weak as poultry farm economics turned adverse.

Q1FY23 Results: Abbott India’s revenues were in line with our expectations while margins were marginally lower

* Sales were up 7% YoY to | 1304 crore

* EBITDA was at | 270 crore, up 2% YoY with margins at 20.7%

* Consequent PAT was at | 206 crore (up 5% YoY

What should investors do? Abbott’s share price has grown by ~2.2x over the past three years (from ~| 8434 in August 2019 to ~| 18762 levels in Aug 2022)

* Downgrade from BUY to HOLD as valuations at current level largely factor power brands growth momentum and growing traction for new brands

Target Price and Valuation: Valued at | 21140 i.e. 40x FY24E EPS of | 528.6

Key triggers for future price performance:

* Consistency in brand-driven growth driven by favourable market dynamics with doctor prescription stickiness and lower perceived risk factors

* NLEM price hike of ~10.8% for estimated NLEM portfolio exposure of ~21% for Abbott may have positive impact on price led growth

* Focus on new launches, which is fairly consistent (+100 launches and line extensions in the last 10 years)

* Future launches from key divisions, along with brand extensions and access to innovative molecules from global parent to drive growth

Alternate Stock Idea: Apart from Abbott, in our healthcare coverage we like Pfizer.

* Pfizer is following a measured approach with de-focusing and hiving off of tail brands and focusing on core strengths areas such as vaccines, pain management, VMS, GI and CVS

 

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