Abbott India (Accumulate)
CMP: Rs 1,459
Target: Rs 1,590
For 3QCY2012, Abbott India Ltd (AIL) reported a marginal top line growth of 2.6 per cent y-o-y to about Rs 417 crore from about Rs 406 crore in 3QCY2011. Ebitda margin contracted by 237 bps y-o-y to 13.2 per cent from 15.6 per cent in 3QCY2011 on account of higher raw material cost and employee expenses.
AIL’s merger with Solvay Pharma (SPIL) in CY2011, has provided AIL a widened product portfolio, thus giving it access to untapped therapeutic segments. We expect AIL to post a 12.6 per cent CAGR (compound annual growth rate) in revenue to about Rs 1,833 crore over CY2011-13E. While Ebitda margin is expected to expand by 183 bps from 10 per cent in CY2011 to 11.8 per cent in CY2013E resulting from reduced expenses post amalgamation due to complimentary nature of businesses of the merged entities (AIL and SPIL). Hence, we expect the company’s net profit to witness a 12.5 per cent CAGR over CY2011-13E to about 152 crore. At the CMP, the stock is trading at a PE of 21.4x its CY2013E earnings and EV/sales of 1.5x for CY2013E.