Abbott Laboratories Pakistan

24 May, 2017

Abbot Laboratories Pakistan (PSX: ABOT) is the second biggest pharmaceutical company in Pakistan by market share. Globally the company was founded more than 125 years ago by Dr Wallace C. Abbott and has its headquarter in Chicago, USA. The global giant has presence in over 150 countries and employs more than 74,000 people.
Abbott started its operations in Pakistan in 1948 and is listed on the Pakistan Stock Exchange with a market capitalization of 88 billion rupees. The company is involved in the manufacturing of diversified range of more than 200 pharmaceutical and general healthcare products to meet the demands of local as well as international market. Abbott's range of product includes generic pharmaceuticals, medical devices, laboratory diagnostics and nutrition. The pharmaceutical segment contributes about 75 percent to the company's revenue and includes products such as Brufen, Entamizole, Klaricid and Duphaston.
Nutrition segment is the most profitable segment of the company and has 30 percent market share. It includes products like Ensure and Pediasure. The company has two plants in Karachi located at Korangi and Landhi. Over 1500 employees make up the work force of the company.
Historical performance: Abbott's performance over the last five years has been really good. The company has almost doubled its revenues while earnings per share have gone from 16.8 rupees in 2011 to 41 rupees in 2016. The margins of the company have also steadily risen. In the last five years the gross margins have increased by 4 percent mainly due to lower cost of raw material and a better product mix. The nutrition segment has been instrumental in driving up the gross margins of the company.
Product-wise the company has been launching on average 6 to 8 products each year which has resulted in overall growth of the company. In addition to product launches, the company has increased its branding activities and expenditure on advertisement which has made sure that brand re-call among the customer is maintained.
1QCY17 snapshot: The first quarter of 2017 was not impressive as far as the earnings of the company are concerned. Against market expectations the earnings per share dropped by 2 percent. The company still showed increase in its revenue by 10 percent but gross margins dropped by 1.1 percent. The exports increased by 18 percent but its contribution to the overall top line is insignificant. In 2016, the company had introduced 12 new products across all its business segments but the impetus seems to be missing.
Share price performance vs KSE-100 The share price of Abbott Pakistan has had a mix run over the last twelve months. Last year initially the share price underperformed the benchmark KSE-100 index until its second quarter result after which it saw a decent rally. The big surge in the price came at the end of 2016 when local investors bought significant quantity of shares from a foreign fund. This led to an almost 30 percent increase in the stock price.
However, due to an unexpected drop in earnings during the first quarter, the stock took a hit and down almost 30 percent from its highs. Over the last few weeks the volumes in the stock have also dried up considerably. Investors are awaiting a positive trigger which would take the stock price north.
Pattern of shareholding: Abbott Pakistan being a multi-national company has majority of its shareholding outside Pakistan. The parent company holds about 78 percent of the total outstanding shares. Mutual funds and general public as compared to last year have increased their holding in the company and now have 5.7 percent and 10.1 percent shares respectively. They were able to increase their holding as one of the foreign funds decreased its position during 2016.
Future outlook: Healthcare penetration in Pakistan is on the rise and will keep on increasing given the circumstances of the country. Abbott being one of the largest players in the market is in the prime spot to take advantage of this situation. Apart from pharmaceutical sales, the nutritional segment is also direct beneficiary of rising per capita income. The company considers Pakistan as one its key markets going forward and plans to introduce new products each year.



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Pattern of Shareholding (As of Dec 31, 2016)
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Directors, CEO, and their Spouces and minor children 41,641 0.04%
Associated Companies, Undertakings and related parties 77,189,066 78.84%
M/S. Abbott Asia Investments Limited 76,259,451 -
Trustees Abbott Pakistan Staff Provident Fund 490,926 -
Trustees Abbott Pakistan Staff PensionFund 438,689 -
Mutual Funds 5,585,001 5.70%
Executives 6,280 0.01%
Public Sector Companies & Corporations 830,624 0.85%
Banks, DFI, NBFC, Insurance Co, Takaful,
Modaraba & Pension Funds 1,902,736 1.94%
Individuals 9,891,482 10.10%
Others 2,453,472 2.52%
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Source: Company Accounts



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Abbott Pakistan Recent Performance
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Rs (mn) 1Q2017 1Q2016 YoY
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Domestic Sales 5,127 4,659 11.10%
Export Sales 268 226 28.20%
Total Sales 5,395 4,886 11.90%
Cost of goods sold 3,398 3,024 9.30%
Gross Profit 1,997 1,862 16.20%
Selling and distribution expenses 917 892 17.00%
Administrative expenses 101 110 12.70%
Other charges 141 80 8.00%
Other income 114 117 -9.70%
Finance costs 0.2 0.1 17.70%
Taxation 245 246 10.10%
Net Profit 705 721 15.50%
EPS 7.2 7.37 15.50%
Gross Margin 37.0% 38.1 % down 110bps
Net Margin 13.4% 14.8% down 140bps
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Source: Company Accounts

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