BackAbbott India’s outlook brightens with a rebound in pharma market
Multinational companies with a focus on India have remained insulated from the volatility seen in other markets
PremiumShares of Abbott India Ltd have gained more than 40% from the lows of February, thanks to the recent rebound in the Indian pharma market (IPM).
Investor confidence was buttressed after the firm reported a good show in the June quarter.
In April-July, IPM growth was 32% after a mere 2% growth for the entire FY21, according to analysts. True, the growth includes the extraordinary gains from covid treatment and management drugs sale. Nevertheless, IPM growth is expected to improve meaningfully in FY22. This helps pharma firms such as Abbott India due to their focus on domestic markets over global.
“Abbott is expected to sustain its double-digit growth trajectory over the next two-year period, driven by a revival in the IPM growth, presence in high growth therapy areas and strong performance of top brands," said analysts at Sharekhan.
In the June quarter, the firm reported 14.4% growth in revenues. The performance of key products such as Thyronorm, Udiliv, Duphalac, Vertin, Cremaffin Plus and Digene remained robust, with a growth of 27-58% year-on-year (y-o-y). Its diabetes portfolio under Novo grew by 68% y-o-y.
“The core leading brands of Abbott have been sustaining high double-digit growth, which we expect would sustain and improve post the pandemic," said analysts at Centrum Stock Broking Ltd. Its product range includes well-established brands in therapies such as diabetes care, women’s health, gastrointestinal and neuro, which are growing fast.
Another factor that has worked for Abbott India is its focus on the domestic market. Multinational companies with a focus on the Indian market have remained insulated from the volatility witnessed in others. Many Indian pharma companies have witnessed pricing pressure impacting their growth trajectory in the US due to intense competition. The currency headwinds in emerging markets also had an impact on the performance of a few others.
“We remain positive on the company considering its exposure exclusively in domestic formulations, strong balance sheet with deep cash reserves, high return ratios and strong brand equity built over the years," said analysts at ICICI Securities Ltd.
They expect revenue and net profit to grow at 9.8% and 16.8% compound annual growth rate over FY21-23 respectively.
In light of these, the increase in the company’s share price to a record high indicates that investors have taken note of the positives. That said, investors would do well to monitor the firm’s costs, especially those arising out of promotional and field force travel, which remained under check during the pandemic.
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