This large-cap pharmaceutical stock is Axis Securities’ top pick of the week: here’s why

Main investment rationale for Abbott India Ltd (AIL) according to Axis Securities

  • Abbott India averaged 11% growth versus 5.8% IPM growth during the months of October and November for the year 2021. Abbott India topped industry growth by 520 basis points in the last 2 months. The gastrointestinal segment saw strong growth of around 30%, driven by the normality of OPD operations in the country. Duphaston (gynecological) sales stabilized thanks to competition from humans.
  • The company retained the leading position (90%) in the respective therapies that involve women’s health, gastroenterology, metabolism, pain management, CNS and vaccines. Abbott India Ltd is a leader in 9 out of 10 major brands in their respective fields. Products like Diegene, Brufen, Cremaffin, Influvac recorded strong growth thanks to the addition of new functionalities.
  • AIL reported healthy cash generation of Rs 470 Cr in the first half of FY22 which brought cash flow to Rs 2250 Cr in the company’s balance sheet. The overall improvement in operating margins in the first half of fiscal 22 led to an increase in return on capital employed (RoCE). Branding activities are expected to improve overall profitability. The company has a strong FCFF of 65.0% of earnings before interest, taxes, depreciation and amortization (EBITDA) with high yield ratios and dividend payout.
Buy with a target price of Rs. 20,000

Buy with a target price of Rs. 20,000

Abbott India’s continued efforts to move from awareness to compliance to lifestyle modification have resulted in its success in the industry. The above strategy has led Abbott India’s branded business to grow 1.5 to 1.8 times the industry growth. We recommend BUY with a TP of Rs 20,000 / share, the brokerage said in its research report.

Warning

Warning

The above stock was selected in the Axis Securities brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author and the brokerage are not responsible for any losses caused as a result of decisions based on the article.

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