Buy This Multibagger Mid Cap Pharma Stock For Double-Digit Returns, Recommended By Sharekhan

Abbott India Limited (Abbott) gets a buy call in Sharekhan's recent report. The brokerage suggests buy the stock of the company for an estimated target price of Rs 22,780 apiece. Abbott is a mid-cap Pharmaceuticals company with a market cap of Rs 38,838.41 crore. Considering the stock's current market price and the brokerage's estimated target price, stocks could surge up to 25% in 12 months.

Stock Outlook

The current market price (CMP) of the stock is Rs 18,267.55 apiece at the time of writing. The 52 week low of the stock was recorded on 08 February 2022 at Rs 15,514 apiece and the 52 week high was recorded on 05 October 2021 at Rs 23,934.45 apiece.

Returns of Investments

Last week, the shares of the company fell nearly 0.99%, giving a negative return, whereas, in the past 1 month, the shares gave a negative return of 10.05%. Over the past 1 year, the shares of the company gave negative returns of 11.82%. Whereas, in the past 3 years, the shares gave a positive return of 83.62%. In the past 5 years, the shares gave a multibagger return of 336.01%.

Double-digit growth to sustain

Abbott's annual report for FY2022 mentions of performance reflecting the impact of pandemic pointing towards uncertain times. The company during these challenging times has reported a double digit revenue as well as earning growth and the agility of evolving business model ensured that the company could tackle the dynamic environment with minimal disruptions. Abbott identified critical areas to strengthen business model and foster customer relations, which involved leveraging digital platforms to improve access, expand portfolio depth and tapping different engagement channels. The commentary mentioned of consistent portfolio expansion with the company launching around 10 new products in the FY2022, which is backed by a strategy of having a presence in key therapeutic areas across the industry. During FY2022 Abbott focused to increase the penetration in rural areas and looks to further increase penetration in these areas.

IPM to report close to double-digit growth for 2022

Management sees IPM to grow inn high single digit of 9.5%. Growth is expected to be driven by improved access to healthcare, increase awareness and diagnosis of non-communicable diseases, new product launches, and expansion of the hospital infrastructure. In addition, new co-marketing agreements and expansion of pharmacy chains/online models would drive IPM's growth. Price hikes would add to IPM's growth. Further, likely sustained traction in acute therapies bodes well for Abbott from a growth perspective.

Abbott identifies critical areas to strengthen its business model and foster customer relations

Backed by management's determination to achieve market beating growth and continue market share gains, Abbott has identified critical areas for focus, which provide opportunities to improvise its business model and fortify customer relations. Some of the key areas include increasing portfolio depth/expansion of the product portfolio, tapping different channels, and leveraging digital channels to improve access. Collectively, based on the above, the company aims to strengthen its business model, foster customer relations, and add to its growth.

Presence across therapy areas with a leadership position bodes well

Abbott's key brands include Duphaston, Thyronorm, Duphalac, and Udiliv. The company has outperformed the market and maintained its leadership in these brands. Further, in the past three years, over 52 products were launched, including line extensions. The company has a sturdy product pipeline, which would unfold gradually going ahead. Abbott expects to launch ~100 new products by FY2024-FY2025. Collectively, sustained growth and leadership from existing brands, product portfolio expansion, efforts to improve the reach, and penetration would be the key growth drivers for Abbott.

Double-digit growth on the cards; Retain Buy

In its annual report, Abbott has mentioned about double-digit growth in FY22 despite challenges posed by the pandemic, backed by an evolving business model, which led to minimal disruptions. Moreover, the company has identified critical focus areas, which would further strengthen its business model and foster customer relations, which could drive growth ahead. Abbott's revenue and earnings are expected to stage a strong 11% and 14% CAGR over FY2022-FY2024E. Close to double-digit growth in IPM is expected to sustain going ahead, driven by multiple growth drivers as well as a sizeable contribution from acute therapies. This coupled with increasing geographic penetration and strong performance of its top brands are key growth drivers for Abbott. At the CMP, the stock trades at 43.3x /37.6x its FY2023E/FY2024E, respectively. Healthy growth prospects, a strong, debt-free balance sheet, and strong dividend payout are key positives. Based on this, we retain Buy on the stock with an unchanged price target (PT) of Rs. 22,780.

Key Risks

Impact of substitution from cheaper-priced generic Aushadi or trade generics can impact overall profitability.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.