Abbott India's Net Up By 35%

Abbott India, an Indian subsidiary of international pharma giant Abbott laboratories, has reported 35% growth in its net profit to Rs 50 crore from Rs 37 crore reported a year earlier. The topline of the company has reported 14% growth to Rs 438 crore. For the full year ended December 31, 2012, Abbott has reported an 11% growth in the topline to Rs 1652 crore and 20% growth in the bottomline to Rs 145 crore.

During the quarter, the company has reported a decline in its input prices. The stock has declined by 15%, while other expenses have scaled down by 19%. The net impact was an expansion of the EBITDA margins by 232 basis points. On a sequential basis too, the margins have expanded by over 300 basis points.

During the quarter, the company has reported about 10% growth in its other income to Rs 5.5 crore. Its tax rate during the quarter remained marginally lower at 32% compared to 34% a year earlier.

From the results, it is clear that the company has majorly seen a higher growth during the December quarter. For the first in nine months of the year, it had reported 14% growth in the net profit.

As per its year-end balance sheet published with the Q4 results, the company has reported an 18% growth in its net worth. The reserves have increased from Rs 522.89 crore to Rs 625.61 crore. The company does not have any long-term liabilities, although it has Rs 44 crore short-term liabilities. The cash available with the company stands at Rs 324 crore. Due to the higher cash balance, Abbott India becomes a debt-free company.

On the valuation front, the stock, at the price of Rs 1401, is trading at the TTM Price to Earnings multiple of 20x. This is in line with its peer group. However, being an MNC, the company operates in India and hence its growth rate remains below that of the large Indian pharma companies which are operating in generic markets such as US, Europe and Japan.

The new pharma pricing policy (NPPP), which is expected to be implemented sometime next year, would mostly hit the revenues of MNCs. Abbott being restricted to the domestic pharma market, may see some margin impact once the NPPP is implemented. Considering this, the stock has already come down by 6% this year. As the impact of the NPPP cannot be predicted at this time, the stock may remain volatile going ahead and hence it is advisable to avoid the scrip at the moment.