Buy Abbott India Ltd : Decent quarter with sustained margins - ICICI Direct
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Buy Abbott India Ltd For Target Rs.20360
Decent quarter with sustained margins…
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 others.
* The company’s top five brands - (Duphaston– gynaecological, Thyronorm– thyroid, Udiliv, Duphalac– both GI and Vertin- CNS) together posted revenue CAGR of ~13% in March 2017-21 (MAT basis)
* Abbott has 140+ brands in segments of women’s health, gastroenterology, metabolics, CNS, multi-specialty, vaccines & consumer health.
Q1FY22 Results: Abbott reported robust Q1FY22 results.
* Sales were up 14.4% YoY to | 1217.8 crore
* EBITDA in Q1FY22 was at | 265 crore, up 13% YoY with margins at 21.8%
* Consequent PAT was at | 195.8 crore (up 8.5% YoY).
What should investors do?
Abbott share price has grown by ~4x over the past five years (from ~| 4666 in July 2016 to ~| 19012 levels in July 2021).
* We maintain our BUY rating on the stock given the good Q1 performance and possible medium term traction
Target Price and Valuation: We value Abbott at | 20360 i.e. 42x P/E on FY23E EPS.
Key triggers for future price performance:
* Abbott continue to have a robust and sustainable business model backed by stable growth, debt-free b/s, favourable market dynamics with doctor prescription stickiness and lower perceived risk factors
* Abbott’s strong growth track in power brands and capability in new launches on a fairly consistent basis (+100 launches 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 Sanofi.
* It offers drugs in therapies like diabetes (insulins & orals), cardiology, thrombosis, anti-infective, CNS, allergy, vitamins, minerals & supplements.
* BUY with target price of | 9750.
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