Abbott India - 1QCY2013 Result Update - Angel Broking

For 1QCY2013, Abbott India (AIL) reported an 11.6% yoy growth in top-line at Rs. 420cr, although 3.2% lower than our estimate of Rs. 433cr. The EBITDA margin expanded by 313bp yoy, primarily due to lower raw material prices and lower other expenses. However, the adjusted net profit increased by just 17.1% yoy to Rs. 32cr, due to an exceptional item arising from write-back of depreciation and provision for expired goods in 1QCY2012.

Top brands to keep performance upbeat, new product introductions to support: AIL's merger with Solvay Pharma (SPIL) in CY2011, has provided AIL access to new therapeutic segments and additional brands. Currently, AIL has 10 products among the top 300 brands in the Indian pharmaceutical market. Moreover, continuous launch of new products in untapped therapeutic segments is expected to support growth in the long term.

Solvay synergies to facilitate sustainable margin: Amalgamation of AIL with SPIL has led to operational synergies in its manufacturing plants. This has resulted in lower raw material cost as a percentage of sales, thus providing better margins. Cost saving measures from various transformation programs and lower promotional spends are expected to facilitate in sustaining EBITDA margin at higher levels.

Outlook and valuation: We expect AIL to post a 12.2% CAGR in revenue to Rs. 2,081cr over CY2012-14E, while the EBITDA margin is expected to be marginally higher at 12.4% in CY2014, resulting from lower expenses. Hence, we expect the company's net profit to witness a 10.4% CAGR over CY2012-14E to Rs. 176cr. At the current market price, the stock is trading at a PE of 17.2x its CY2014E earnings. We maintain our Buy recommendation on the stock with a target price of Rs. 1,659 based on a target PE of 20x for CY2014E.

Source : Equity Bulls

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