Buy Abbott India; target of Rs 30,540: Sharekhan

Sharekhan's research report on Abbott India

Abbott reported healthy earnings an annual basis but earnings lagged our estimates where sales grew by 7% y-o-y to Rs 1438 crore (1.3% below our estimates), EBITDA grew by 17.7% y-o-y to Rs 329 crore (13% below our estimates) and PAT grew by 29% y-o-y to Rs 287 crore (4% below our estimates). Healthy product mix resulted in Gross Margin expansion by 60 bps y-o-y to 44% and EBITDA Margins increment by 207 bps y-o-y (303 bps below our estimates). Abbott paid 72.5% of its profits to shareholders by continuing to pay hefty dividends of Rs 410 to its shareholders. Cash balance as on FY24 stood at Rs. 2134 crore.

Outlook

On the back of robust innovative pipeline (plans 75 launches in the next five years), expanding return ratios and strong cash balance (cash reserves of Rs. 2134 crore) that can be used for M&A activity, hefty dividend payout and new product launches which adds to a positive outlook going forward. At CMP, the stock trades at 40.4x/ 36.3x its FY2025E/FY2026E EPS of Rs 633 and Rs 704 per share, respectively and due to superior margin profile and PAT growth, we ascribe a multiple of 43x on FY26E to maintain our PT of Rs. 30,540.