Abbott India Ltd - Research Report

Private Client Research

Rating

Buy

Sector

Pharmaceuticals & Drugs

Company

Abbott India Ltd

Pharmaceuticals & Drugs


April 12, 2018

Sensex: 34101.13


CNX Nifty: 10458.65

NSE: ABBOTINDIA


BSE: 500488

Reco Price
Rs. 6000.00
Price Target (1 Year)
Rs. 7200.00
Upside
20.00%

Date

April 12, 2018

Sensex

34101.13

CNX Nifty

10458.65

Exchange

Code

NSE

ABBOTINDIA

BSE

500488

Stock Data

CMP (Rs)
6071.45
Face value (Rs)
10
52 Week Range (Rs)
6159.00 - 3988.00
Market cap (Rs Crores)
12910.54
Price To Book Value (x)
8.62
P/E Ratio (x)
39.92
EV/EBIDTA (x)
22.74

One Year indexed Stock Performance

Abbott India Ltd Sensex
Abbott India Ltd
Return (%)
1m
6m
12m
36m
Absolute
7.98
44.95
28.73
52.27
Sensex
0.54
5.96
15.04
17.41

Shareholders

(in %)
31-Dec
Promoter
74.99
Public
25.01
Others
0.00
Total
100

+91 22 6639 3000

research@stockaxis.com

Top player with new product launches to deliver growth.

Entering into sub-therapies:
Abbott India Limited has presence in almost 90% of the broad therapy areas (woman’s health, gastroenterology, thyroid, diabetes, neurology, vaccines, pain management and general care) and is now venturing into sub-therapies. Currently the company markets over 110 brands in India and is the leader in thyroid segment. It has over 55% market share through its flagship brand Thyronorm which despite being under drug price control is still growing at above 40%. The company now has plans to enter into sub therapies such as thyroid cancer.

Continued growth in branded segment:
To accelerate growth Abbott would be launching 20-22 products in the branded segment every year for the next 5 years. This is against 14 launches last year. The company is looking forward beyond pills segment to meet its strategic intent of being a pioneer healthcare company. It has access to innovative molecules of its global parent company which would further help them to create more brands.

Cash rich with improved return ratios:
Abbott India is a debt free company with cash and cash equivalents of Rs. 1157.76 crores as on H1FY18. The company over the years has improved its EBITDA margins from the lows of 12% in FY14 to 15% in FY18E. It has maintained dividend payout in the range of 30% in the past 4 years and has cash per share of Rs. 544.85 in H1FY18.

The company is able to deliver healthy return ratios because of continued new product launches, volume growth and price hikes.

Campaigning to create awareness:
The company is continuously campaigning for various therapies to understand the patient journey right from spreading awareness to a patient, to their diagnosis and treatment along with post-treatment care and lifestyle modifications.

For Example: Company’s campaign on constipation involved a nation-wide gut health survey to assess the condition of constipation sufferers in the country as well as the association of constipation with comorbidities such as diabetes, hypothyroidism.

The survey found out that 49% of the respondents were shy about seeking medical help to solve their problem. In fact, on an average, respondents admitted to waiting for an average of four months before deciding on consulting a doctor. Also, a 33% of the sufferers never treated constipation, while 48 %resorted to home remedies to treat the condition.

It is these untapped customers that the company plans to tap into creating awareness which would boost the revenues of the company.

Industry

Indian pharmaceutical sector is estimated to account for 3.1-3.6% of the global pharmaceutical industry in value terms and 10% in volume terms. It is expected to grow to US$100 billion by 2025. India accounts for 20% of global exports in generics. India’s pharmaceutical exports stood at US$ 16.84 billion in 2016-17 and are expected to reach US$ 20 billion by 2020. The country’s pharmaceutical industry is expected to expand at a CAGR of 12.89% over 2015–20 to reach US$ 55 billion.

Indian healthcare sector, one of the fastest growing sectors, and is expected to cross US$ 372 billion by 2022. The generics market stood at US$ 26.1 billion in 2016. India’s generics market has immense potential for growth. Indian pharmaceutical companies received record 300 generic drug approvals in USA during 2017 where the generic market is expected to reach US$ 88 billion by 2021.

The Government of India has unveiled 'Pharma Vision 2020' aimed at making India a global leader in end-to end drug manufacture. It has reduced approval time for new facilities to boost investments. Further, the government has also put in place mechanisms such as the Drug Price Control Order and the National Pharmaceutical Pricing Authority to address the issue of affordability and availability of medicines.

Profile

Since 1910, Abbott has been dedicated to helping people in India live healthier lives through a diverse range of science-based nutritional products, diagnostic tools, branded generic pharmaceuticals, and diabetes and vascular devices. One of India's fastest-growing pharmaceutical companies, Abbott India Limited is part of Abbott's global pharmaceutical business in India and takes pride in offering high-quality trusted medicines in multiple therapeutic categories such as women's health, gastroenterology, cardiology, metabolic disorders and primary care.

Abbott India Limited believes in providing quality healthcare through a mix of global and local products for people in India. Its in-house development and medical teams undertake product and clinical development tailored to the unique needs of the Indian market. Its employees work to produce high-quality, high-volume formulations using cost efficient processes. And, its trained personnel are dedicated to ensuring compliance with international quality standards.

Profit & Loss Statement:- (Consolidated)

(Rs Crores)

DESCRIPTION Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 E Mar-19 E
Net Sales 2275.90 2289.33 2614.50 2902.56 3300.00 3762.00
Growth (%) 0.59 14.20 11.02 13.69 14.00
Total Expenditure 2008.62 1978.01 2250.77 2507.75 2805.00 3197.70
EBITDA 267.28 311.32 363.73 394.81 495.00 564.30
% Margin 11.74 13.60 13.91 13.60 15.00 15.00
Other Income 49.29 48.48 51.24 60.15 65.00 65.00
Operating Profit 316.57 359.80 414.98 454.96 560.00 629.30
Interest 0.08 0.50 2.52 2.04 2.20 2.20
PBDT 316.49 359.30 412.45 452.92 557.80 627.10
Depreciation 21.93 14.94 14.44 16.43 16.00 16.00
Profit Before Taxation & Exceptional Items 294.55 344.36 398.01 436.49 541.80 611.10
Tax 96.10 115.40 142.76 159.84 191.00 191.00
Profit After Tax 198.45 228.96 255.25 276.65 350.80 420.10
Adjusted EPS 93.39 107.75 120.12 130.19 165.09 197.70
Source: Stockaxis Research, Company Data

Valuation

Being one of the top player in the industry the company is expected to continue deliver higher growth because of new product launches and increased focus in sub-therapies. We Initiate ‘BUY’ on attractive valuations with Target Price of Rs 6000 based on 30x FY19E EPS. The stock trades at 38x on TTM basis.