Abbott India (ABBIND)

CMP: | 16275 Target: | 19030 (17%) Target Period: 12 months BUY

June 9, 2020

FY20 performance reflects strength of power brands…

While Q4FY20 results were subdued as the nationwide lockdown
marginally impacted availability of raw materials, finished goods and

Company Update
supply chain distribution, overall FY20 revenues grew 11.3% YoY to |
4093.1 crore, mainly due to strong growth in key therapies & power
brands. EBITDA margins improved 204 bps YoY to 18.5% mainly due to Particulars
better operational leverage. EBITDA grew 25.1% YoY to | 756.4 crore. PAT P a rticu la r Am o u n t
grew 31.7% YoY to | 592.9 crore. Delta vis-à-vis EBITDA was mainly due to Mark et C apitalis ation | 34583 crore
lower tax rate. D ebt (F Y 20) | 0 crore
C as h (F Y 20) | 2197 crore
“Power brands” continue to grow ahead of industry growth EV | 32386 crore
52 week H /L 18680/7920
Abbott India is one of the fastest growing listed MNC pharma companies. It
has outperformed the industry on a consistent basis in women’s health, GI, E quity capital | 21.3 crore

metabolic, pain, CNS, vaccines. The company’s top 10 brands including F ace value | 10

(Duphaston- gynaecological, Thyronorm – thyroid, Udiliv, Vertin, Price Performance

Duphalac– GI) together posted ~18% revenue CAGR in March 2015-20
(MAT basis). This has led their combined contribution in total revenues to 20000 12000
grow from 37% in March 2015 to ~47% in March 2020. Thus, it is evident 10000
15000
that revenue growth has been driven by top brands (power brands). Apart 8000
from this, continuous new launches and line extension in existing and new 10000 6000
segments is also driving growth. We expect future launches of new 4000
products from its key divisions, along with brand extensions and access to 5000

ICICI Securities – Retail Equity Research

2000
innovative molecules from global parent to drive growth.
0 0
Margin improvement with better return ratios

Jun-17

Jun-18

Jun-19

Jun-20
Dec-17

Dec-18

Dec-19
Abbott India is a debt-free company and has seen its core RoEs improving
from 72% in FY14 to 216% in FY20. EBITDA margins recovered from lows Abbott India(L.H.S) NSE500(R.H.S)
of 11.8% in FY14 (due to inclusion of one its top brand (Thyronorm) under
price control) to 18.5% in FY20. The core margins of the company could
have been even better after excluding marketing margins (related to Novo
Research Analyst
Nordisk diabetic portfolio). Apart from this, the recent tax amendments
have had the effect of reducing its tax rate from 36% in FY19 to 25-26% Siddhant Khandekar
from FY20 onwards. Continued new product launches, volume led growth [email protected]
in Abbott India’s top brands and intermittent price hikes in its portfolio Mitesh Shah, CFA
provide comfort on overall financials. The company has also declared a | [email protected]
250 dividend (final: | 107 + special: | 143) per share for FY20.
Sudarshan Agarwal
Valuation & Outlook [email protected]

Covid-19 related disturbances notwithstanding (likely to impact Q1FY21),

companies from the pharma MNC staple like Abbott continue to generate
investor’s interest with robust and sustainable business model backed by
stable growth, debt-free B/S, favourable market dynamics with doctor
prescription stickiness and lower perceived risk factors. We continue to
believe in Abbott’s strong growth track in power brands and capability of
new launches on a fairly consistent basis (+100 launches in the last 10
years). We upgrade the stock from HOLD to BUY and arrive at a target
price of | 19030 based on 45x FY22 EPS of | 422.8.
Key Financial Summary
F Y19 F Y20 F Y21E F Y22E C AG R F Y20-22 (%)
R evenues 3678.6 4093.1 4508.3 5114.9 11.8
E B ITD A 604.7 756.4 830.7 1094.5 20.3
E B ITD A m argins (% ) 16.4 18.5 18.4 21.4
Net P rofit 450.3 592.9 669.1 898.5 23.1
E P S (|) 211.9 279.0 314.9 422.8
P E (x) 76.8 58.3 51.7 38.5
R oC E (% ) 33.9 30.7 33.9 37.4
RO E 22.4 24.4 27.2 29.6
Source: ICICI Direct Research; Company
 Company Update | Abbott India ICICI Direct Research

Exhibit 1: Power brands

B ra n d s T h e ra p y F Y15 F Y16 F Y17 F Y18 F Y19 F Y20 C AG R 15-20
D U P H A S TO N G ynaecolgy 163.6 164.7 210.6 262.0 358.9 380.5 18.4
TH Y R O NO R M H orm one 152.1 179.0 194.0 260.8 342.2 352.8 18.3
U D IL IV GI 111.5 118.3 161.2 197.3 252.3 286.2 20.7
V E R TIN C NS 93.6 126.1 135.5 149.8 166.5 179.8 13.9
DUP HALAC GI 105.1 112.0 122.8 132.4 154.9 171.1 10.2
E NS U R E V itam ins 45.3 45.5 52.4 62.3 87.8 113.0 20.0
S IMIL A C V itam ins 26.0 55.7 90.9 106.9 128.5 112.4 34.0
C R E MA F F IN P L U S GI 34.0 46.1 61.1 75.0 89.8 111.1 26.7
C R E MA F F IN GI 62.7 76.5 84.1 85.1 94.7 106.2 11.1
C L A R IB ID A ntibiotic 57.0 60.1 36.0 59.0 63.5 98.2 11.5
T o p 10 851.0 983.9 1148.8 1390.5 1739.1 1911.2 17.6
T o ta l sa le s 2281.2 2614.5 2902.6 3298.5 3678.6 4093.1 12.4
Top 10% of s ales 37% 38% 40% 42% 47% 47%
Source: AIOCD; Company; MAT based value in | crore

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 Company Update | Abbott India ICICI Direct Research

Financial Summary

Exhibit 2: Profit & Loss (| crore) Exhibit 3: Cash Flow Statement (| crore)
Ye a r-e n d Ma rch F Y19 F Y20 F Y21E F Y22E Ye a r-e n d Ma rch F Y19 F Y20 F Y21E F Y22E
Total O perating Incom e 3,678.6 4,093.1 4,508.3 5,114.9 P rofit/(L os s ) after taxation 442.2 573.5 669.1 898.5
G rowth (% ) 11.5 11.3 10.1 13.5 A dd: D epreciation & A m ortiz ation 16.9 59.6 62.8 67.3
R aw Material E xpens es 2,088.6 2,315.7 2,543.6 2,800.3 Net Increas e in C urrent A s s ets -51.6 84.0 -253.2 -163.4
G ros s P rofit 1,590.0 1,777.5 1,964.7 2,314.6 Net Increas e in C urrent L iabilities186.0 -14.2 178.7 135.1
G ros s P rofit Margins (% ) 43.2 43.4 43.6 45.3 O thers -94.4 -76.8 8.5 8.5
E m ployee E xpens es 435.6 476.1 536.3 580.7 C F fro m O p e ra tin g a ctivitie s 499.1 626.1 666.1 946.0
O ther E xpenditure 549.7 544.9 597.8 639.4
Total O perating E xpenditure 3,073.9 3,336.7 3,677.6 4,020.5 Inves tm ents -554.1 -506.0 0.0 0.0
E B IT DA 604.7 756.4 830.7 1,094.5 (P urchas e)/S ale of F ixed A s s ets 4.5 -15.6 -30.0 -30.0
G rowth (% ) 15.3 25.1 9.8 31.8 O thers 846.2 625.3 -12.5 -11.0
Interes t 2.3 8.5 8.5 8.5 C F fro m In ve stin g a ctivitie s 296.6 103.8 -42.5 -41.0
D epreciation 16.9 59.6 62.8 67.3
O ther Incom e 113.3 114.4 135.2 182.6 (inc)/D ec in L oan 0.0 -50.1 0.0 0.0
P B T b e fo re E x ce p tio n a l Ite m s698.9 802.7 894.6 1,201.2 D ividend & D ividend tax -140.9 -166.5 -640.4 -318.7
L es s : E xceptional Item s 0.0 0.0 0.0 0.0 O ther -1.9 -0.2 -8.5 -8.5
P B T after E xceptional Item s 698.9 802.7 894.6 1,201.2 C F from F inancing activities -142.8 -216.8 -649.0 -327.3
Total Tax 248.5 209.8 225.4 302.7
P A T before MI 450.3 592.9 669.1 898.5 Ne t C a sh F lo w 652.9 513.1 -25.4 577.8
P AT 450.3 592.9 669.1 898.5 C as h and C as h E quivalent 1,031.4 1,684.3 2,197.4 2,172.0
G rowth (% ) 12.2 31.7 12.9 34.3 C a sh 1,684.3 2,197.4 2,172.0 2,749.8
E P S (Ad ju ste d ) 211.9 279.0 314.9 422.8 F re e C a sh F lo w 503.6 610.6 636.1 916.0
Source: ICICI Direct Research Source: ICICI Direct Research

Exhibit 4: Balance Sheet (| crore) Exhibit 5: Key Ratios (| crore)

Ye a r-e n d Ma rch F Y19 F Y20 F Y21E F Y22E Ye a r-e n d Ma rch F Y19 F Y20 F Y21E F Y22E
P e r sh a re d a ta (|)
E quity C apital 21.3 21.3 21.3 21.3 R eported E P S 211.9 279.0 314.9 422.8
R es erve and S urplus 1,987.3 2,410.5 2,439.2 3,018.9 C as h E P S 133.6 200.7 13.5 272.8
Total S hareholders funds 2,008.6 2,431.7 2,460.4 3,040.2 B V per s hare 945.2 1,144.4 1,157.9 1,430.7
Total D ebt 0.0 0.0 0.0 0.0 C as h per S hare 792.6 1,034.1 1,022.1 1,294.1
D eferred Tax L iability 0.0 0.0 0.0 0.0 D ividend per s hare 78.4 301.4 150.0 150.0
L ong-Term P rovis ions 75.4 84.8 93.3 102.7 O p e ra tin g R a tio s (%)
L eas e L iability 0.0 139.2 125.3 112.8 G ros s P rofit Margins 43.2 43.4 43.6 45.3
S o u rce o f F u n d s 2,084.0 2,655.8 2,679.0 3,255.6 E B ITD A m argins 16.4 18.5 18.4 21.4
P A T Margins 12.2 14.5 14.8 17.6
G ros s B lock - F ixed A s s ets 164.5 389.0 419.0 449.0 C as h C onvers ion C ycle 21.8 16.7 21.8 21.8
A ccum ulated D epreciation 59.6 119.2 182.0 249.4 A s s et Turnover 22.4 10.5 10.8 11.4
Net B lock 105.0 269.8 237.0 199.6 E B ITD A convers ion R ate 82.5 82.8 80.2 86.4
C apital W IP 0.7 1.6 1.6 1.6 R e tu rn R a tio s (%)
F ixed A s s ets 105.7 271.5 238.6 201.3 R oE 22.4 24.4 27.2 29.6
Inves tm ents 0.0 0.0 0.0 0.0 R oC E 33.9 30.7 33.9 37.4
O ther Non C urrent A s s ets 74.2 70.7 77.8 85.6 R oIC 152.3 157.6 156.9 211.0
Inventory 606.8 527.2 743.7 843.7 V a lu a tio n R a tio s (x )
D ebtors 276.1 317.9 338.4 383.9 P /E 76.8 58.3 51.7 38.5
L oans and A dvances 66.2 6.1 6.8 7.4 E V / E B ITD A 54.4 42.8 39.0 29.1
O ther C urrent A s s ets 127.6 156.0 171.6 188.8 E V / Net S ales 8.9 7.9 7.2 6.2
C as h 1,684.3 2,197.4 2,172.0 2,749.8 Mark et C ap / S ales 9.4 8.4 7.7 6.8
Total C urrent A s s ets 2,761.0 3,204.6 3,432.4 4,173.7 P rice to B ook V alue 17.2 14.2 14.1 11.4
C reditors 663.5 657.8 813.2 922.6 S o lve n cy R a tio s
P rovis ions 104.0 107.5 118.2 130.0 D ebt / E B ITD A 0.0 0.0 0.0 0.0
O ther C urrent L iabilities 89.4 125.9 138.5 152.3 D ebt / E quity 0.0 0.0 0.0 0.0
Total C urrent L iabilities 856.9 891.1 1,069.8 1,204.9 C urrent R atio 1.3 1.1 1.2 1.2
Net C urrent A s s ets 1,904.1 2,313.5 2,362.6 2,968.7 Source: ICICI Direct Research
Ap p lica tio n o f F u n d s 2,084.0 2,655.8 2,679.0 3,255.6
Source: ICICI Direct Research

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 Company Update | Abbott India ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according to their notional target price vs. current market price and then categorises them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock

Buy: >15%;
Hold: -5% to 15%;
Reduce: -5% to -15%;
Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

ICICI Securities | Retail Research 4

 Company Update | Abbott India ICICI Direct Research

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ICICI Securities | Retail Research 5