Abbott India outperformed the Indian pharmaceutical market (IPM) with a year-on-year (YoY) growth of 23 per cent in February.
The domestic market grew at a robust 20 per cent on a low base, primarily led by volume growth and price hikes.
Abbott continued to outperform the sector in the anti-diabetic space with a growth of 20 per cent and key brands such as Thyronorm (hypothyroidism), biliary agent Udiliv, insulin Ryzodeg posted robust growth.
Sharekhan Research points out that Abbott India’s sales clocking above the IPM growth over the last several months indicates resilience of the company’s key brands across its focused therapy areas of women’s health, gastrointestinal -- which is the largest contributor to sales -- metabolics, central nervous system, multi-specialty, vaccines, and consumer health segments.
In addition to growing above the industry growth rate and gaining share, given strong doctor prescription stickiness, its focus on innovative marketing and brand-building exercises, besides foraying into new-age channels such as pharmacy chains and e-pharmacies, will support its above-IPM growth rate, says the brokerage.
On the operational front, margins too are expected to remain healthy — led by cost saving measures — believes Centrum Research.
While the company’s gross margins in the December quarter for the 2022-23 financial year (Q3FY23) dipped by 317 basis points (bps) YoY to 43.8 per cent, it managed to expand its operating profit margins by 188 bps YoY to 24 per cent.
The gains were led by lower employee and other expenses which fell by 5 per cent and 21 per cent, respectively. The current run –rate on margin front will continue, driven by better operating performance in core brands, despite slowdown in the insulin portfolio, says Alka Katiyar of the brokerage.
Centrum Research has a ‘buy’ rating on the stock with a target price of ~24,450 while the stock currently trades at ~20,349, which translates into an upside of 20 per cent.
Among the triggers for the stock, according to ICICIdirect, are prices for the drugs under price control (National List of Essential Medicines) which account for about a fifth of the company’s portfolio and are expected to have a positive impact on price-led growth.
In addition to the strong launch pipeline of 75 products over the next five years, performance of the legacy Novo Nordisk and Abbott Healthcare products, for which the company has a marketing tie-up, are the other triggers, say analysts led by Siddhant Khandekar of the brokerage.
Given the multiple triggers, Sharekhan Research, which has a ‘buy’ rating, estimates the company to log a sales growth of 11.5 per cent and net profit growth of 16.9 per cent on an annual basis over the FY22-FY25 period.
What adds to the investment arguments are a debt-free balance sheet and strong dividend payouts.
At the current level, the stock trades at a reasonable 38.3 times its FY24 earnings estimates.