“BUY” This Large Cap Pharma Stock With A Target Price of Rs. 22,780: Sharekhan

The brokerage’s take on Abbott India Ltd

In its latest research analysis Sharekhan has reported that "After a modest 1.6% y-o-y growth for FY2021, IPM growth has bounced back; and for YTD April-November 2021, IPM grew by ~21% y-o-y, largely backed by a low base in the corresponding period of the previous year. Growth was supported by ~10.9% growth in volumes, while the share of pricing and new products stand at ~6% and 4.3%, respectively. Going ahead with the expected strong pricing growth and share of new products, the commencement of OPD appointments and elective surgeries is expected to drive up the prescriptions for acute therapies, which bodes well for Abbott and is expected to positively rub off on growth."

In its report, the brokerage has highlighted that "Abbott's key brands include Duphaston, Thyronorm, Duphalac, and Udiliv. The company has outperformed the market and maintained its leadership in these brands, despite competitive pressures existing. In select brands such as Duphaston and Thyronorm, the company holds a substantially large market share and the same is expected to sustain ahead given measures taken to improve the penetration. Further, in FY21 the company has launched 15 products, which are likely to gain traction and aid the growth. Collectively, sustained growth and leadership from existing brands, product portfolio expansion, efforts to improve the reach and penetration would be the key drivers for Abbott."

According to Sharekhan "Leveraging the digital channel to address the challenges faced during pandemic period, Abbott has developed an array of digital tools and implemented the same for its employees as well as for improving the field force's productivity. Also to better connect with patients so as to be able to address their needs and enhance engagement with doctors, the company has put in place a communication strategy and campaigns accordingly, which bodes well for increasing the penetration in a cost-effective manner."

Valuation – Re-iterate Buy with unchanged PT of Rs. 22,780 Claims Sharekhan

The brokerage has claimed that "Abbott's revenue and earnings are expected to stage a strong 13% and 17% CAGR over FY2021-FY2023E. The expected strong growth of double digits for IPM in FY2022 versus 2% growth reported in FY2021 and a strong presence in therapy areas of gastrointestinal, pain, CNS, gynecology, and anti-invectives, which are the fastest-growing therapies in IPM, bodes well for Abbott. For H1FY22, the gastrointestinal and pain segments grew strongly by 30% and 34% y-o-y respectively, while gynecology and CNS grew by 17.3% and 10.8%, respectively. IPM growth for FY2022 is expected to be broadly driven by acute therapies and this could have a positive rub-off on Abbott as well."

In its research report, Sharekhan has stated that ". Moreover, Abbott looks to enhance its geographical reach by leveraging the digital platform to connect with healthcare professionals and has digitalised around 80% of its training content. This coupled with a sustained strong performance of the top 10 brands could be the key growth drivers. At the CMP, the stock trades at 47.1x/41.5x its FY2022E and FY2023E, respectively. Healthy growth prospects, a strong, debt-free balance sheet and healthy operating cash flows and strong dividend pay-out are key positives and will help in sustaining its premium valuations. We re-iterate our Buy recommendation on Abbott with an unchanged PT of Rs. 22,780."

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.