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Numbers miss despite decent growth in power brands…

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.

* Some top brands- Thyronorm, Udiliv, Duphalac, Duphaston, Cremafin Plus and Veritn have been the growth drivers besides new launches

* Abbott has 140+ brands in segments of women’s health, gastroenterology, metabolics, CNS, multi-specialty, vaccines & consumer health

Q4FY23 Results: Numbers were below estimates across all fronts.

* Revenues increased 7% YoY to | 1343 crore

* EBITDA de-grew 4.7% YoY to | 280 crore while EBITDA margins declined 256 bps to 20.9%

* PAT increased 9.5 % YoY to ~| 231 crore

What should investors do? Abbott’s share price has grown at 7.9% CAGR over the past three years.

* We maintain HOLD rating as valuations at current levels largely factor in power brands growth momentum and growing traction for the new brands

Target Price and Valuation: Valued at | 20875 i.e. 36x FY25E EPS of | 564.3

Key triggers for future price performance:

* Focus on new launches, which is consistent (+100 launches and line extensions in the last 10 years). Target for the next five year- ~75 launches

* Performances of legacy Novo Nordisk and Abbott Healthcare products for which the company has a marketing tie-up

* The company is looking for generic opportunities in India for products loosing patent exclusivity in India over the next five years

* Focus on marketing and patient awareness programmes especially in tier IIVI cities

Alternate Stock Idea: Besides Abbott, in our healthcare coverage we like P&G Health.

* P&G Health is a leading pharma cum OTC company with key focus on vitamins, minerals, supplement (VMS). Its recent earnings reflect sustained efforts to regain momentum via improved mix and productivity initiatives

* BUY with a target price of | 5620

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