Healthy sales in branded portfolio lift Abbott India's margins in Q1

Incremental growth to be led by new launches, expansion into new therapies

Abbott India has been outperforming its larger Indian and multinational pharma peers, gaining 27 per cent since its May lows. 

It has been reporting higher revenue growth led by its branded portfolio, and sales traction in key therapies. Higher margins in the branded segment and improving operating leverage driven by volume uptick helped the firm report a 426-bp improvement in margins during Q1. 

While the domestic pharma market is growing at 9-10 per cent, Abbott reported 18.2 per cent revenue growth in Q1. 

The top 10 brands, including hormonal treatment drug Duphaston, Thyroid control medication Thyronorm, Liver treatment brand Udiliv, Laxatives Cremafin and Duphalac, comprise 72 per cent of the brand business for the firm. The remaining contributions come from the diabetes treatment portfolio. 

Data suggests Abbott India’s top five brands have together registered revenue growth of 20 per cent annually. 

The contribution from the branded portfolio has increased from 26 per cent in March 2015 to 34 per cent in March 2019.  Despite most of the brands being in the matured category, analysts indicate they continue to post high sales growth. 

 

Going digital and expanding services beyond the pill strategies has helped it post sales growth 1.5-1.8 times the industry average, says Ankush Mahajan at JM financial.

Over the next three years, Abbott will build the next set of 10 new brands. In addition to the Digene portfolio, which contributes about Rs 100 crore and falls under the ‘over-the-counter’ category, there is a focus on building a portfolio in this category, involving new therapies. 

The firm is also looking at acquisitions in the segment to boost sales, say analysts.  It is eyeing market-beating growth and plans to launch a total of 100 products over the next five years to drive the same. 

Analysts at ICICI Securities, therefore, expect profits to grow 17 per cent annually over FY19-21.