Abbott India Ltd. share price target

Power brands continue to grow ahead of industry growth The domestic pharma market (~| 1.3 trillion AIOCD MAT July 2019) is growing at 9-10% YoY. Branded generics dominate the pharmaceuticals market, constituting nearly 80% of market share in terms of revenue. Abbott India's top five brands have together registered a revenue CAGR of ~20%, leading combined contribution to Abbott India's sales to grow from 26% in March 2015 to nearly 34% in March 2019. Thus, it is evident that revenue growth has been driven by top brands (power brands) despite one of its top...

We believe BOOT is in the sweetest spot of the Indian pharma market (IPM), with leadership in women's hormones, hypothyroidism, niche gastro treatments, and neuro-ailments. Unlike other MNCs, BOOT has the freedom to launch new products/brands in existing therapies in India. Having a presence in growing therapies, BOOT is estimated to report ~13% revenue CAGR over FY19-21, while select price hikes will drive ~60bps margin expansion, resulting in ~18% earnings growth. With the ability to generate Rs ~3bn+ annual FCFs, super-rich ROICs and strong visibility on growth, we believe BOOT is the best play in the Indian pharma market. While we don't actively cover BOOT, a fair value of Rs 8,950 (30x FY21E EPS) is apparent to us. Abbott India (BOOT) is one of the strongest pharma MNCs with six Rs 1bn+ brands, 36 number one brands, and a substantial presence in both chronic and specialty segments. Historical financial performance has been robust with 16% organic rev CAGR, 25% EBITDA CAGR and 26% PAT CAGR over FY14-18. Adjusted for cash (~Rs 13bn, Sep-18), ROIC has been at 70% plus even as dividend payouts have been ~30%.

Abbott India's (BOOT) Q2FY19 sales were below our expectations by 6% while PAT was a miss by 4.2% against our expectations. Total revenues were up by 5.2% YoY (16% QoQ) at Rs9.8bn driven by higher volumes. EBITDA margins were at 19.8% (est. of 18.5%) up from 13.2% in Q1FY19 given lower staff costs and other expenses. APAT was flat YoY while 4.2% below our estimates at Rs1,377mn (est. Rs1,437mn). Regulatory hurdles have been continuously impacting the revenues of the company. However, we expect growth in-line with the industry on the back of volume growth in its flagship brands and patent product launches from parent....

We recently organised a Management Meet of Abbott India (AIL) for our clients and came out with a positive note. We maintain Hold rating for AIL due to rich valuations. We maintain TP of Rs7,250 (earlier TP Rs7,250) based on 24x March'20 EPS of Rs302.2. AIL is committed to variety of services and has a value added model. We expect margins to improve post the launch of new products and with the company's thrust to the high-margin vaccine segment. Abbott in India has presence in 80-90% of the therapy areas. AIL's top 10 brands contribute 72% of its revenues....

Cyclical low multiples and asset turns make a strong BUY case ABB India is trading at -1 standard deviation of its median forward PE multiple and fixed asset turns are at a 15-year low (4.1x vs high of 10.9x), thus creating headroom for outperformance as operating leverage benefits are likely to drive strong profitability growth. Further, a bulk of order inflow in 1HCY18 is driven by high margin segments of exports (+14%) and service (+47%) orders, presenting a healthy sales mix for CY18-19. Order inflow outlook remains steady as multiple digitalisation orders with longer conversion cycle are underway and are preceded by pilot projects in industries like cement, paint, F&B; and oil &...

Abbott India's (BOOT) Q1FY19 sales were above our expectations by 6.8% while EBITDA /APAT were a miss by 19.5%/31.3% respectively against our expectations. Total revenues were up by 19.7% YoY (7.2% QoQ) at Rs8.5bn driven by higher volumes growth. EBITDA margins were at 13.2% (est. of 17.5%) flat QoQ. from 20.7% given...

We maintain our Buy rating on Abbott India (AIL) and revise the TP to Rs7,530 (earlier TP Rs7,030) based on 24x March'20 EPS of Rs313.6. AIL's EBIDTA for Q4FY18 was lower than our expectations whereas net profit was higher than our expectations. The pharma major's revenue grew 10% YoY, margin improved 470bps to 13.5% and net profit grew 138% YoY. That said, the company's eleven leading brands grew faster than the market and are likely to drive future growth. We expect margins to improve post the launch of new products and with the company's entry into the high-margin vaccine segment. AIL is a debt-free cash...

FY18 revenues increased 14% YoY to | 3299 crore mainly due to strong sales in power brands. Q4FY18 revenues grew 12% YoY EBITDA margins increased 221 bps to 15.9% YoY in FY18 mainly owing to robust gross margins. Gross margins improved 364 bps YoY to 73%. EBITDA margins in Q4FY18 increased to 83% from 67% in Q4FY17. EBITDA rose 32% YoY to | 525 crore in FY18 Net profit increased 45% YoY to | 401 crore in FY18. Q4FY18 net...

Generic pharmaceuticals business has been trending well for Abbott Labs for some time now. It has a broad line of branded generic pharmaceuticals manufactured worldwide, and marketed and sold outside the U.S. The major products sold through this segment include Creon, Brufen, Biaxin, Influvac and Duphaston, among others. Looking forward, company expects double-digit...