Abbott Laboratories is an all-inclusive healthcare company which was founded in 1888. It has presence in over 150 countries and has 74,000 employees working under its name. In 2015, Abbott's global operations revenue was more than USD 20 billion. The company's global headquarter is situated in Illinois, USA. Abbott's range of product includes generic pharmaceuticals, medical devices, laboratory diagnostics and nutrition.
Abbott Laboratories Pakistan (PSX: ABOT) was incorporated 1948 as a marketing affiliate and is one of the oldest companies to start operations in Pakistan. The company has two plants in Karachi located at Korangi and Landhi. Over 1500 employees make up the work force of the company.
Abbott Laboratories Pakistan is the second biggest multi-national pharmaceutical company in Pakistan with a market share of around 6.5 percent. Abbott's product range in Pakistan includes established pharmaceuticals with over 160 products. This segment contributes more than 75 percent to the company's top line and includes high-flying products such as Brufen, Entamizole, Klaricid, Duphalac and others.
The second biggest revenue generating segment is nutrition. It is also the fastest growing segment over the past few years. With blockbuster products such Ensure, Glucerna and Pediasure; Abbott has been able to capture a very big chunk of the nutrition market in Pakistan. Diagnostics and Diabetes segments combined contribute about 7 percent to the product mix. Diagnostics product sales have shown good growth as Abbott has partnered with some of the top hospitals in the country.
Historical Performance:
Over the past five years, the financial performance of Abbott in Pakistan has been nothing short of outstanding. The company has almost doubled its sales from 2010 to 2015. The five-year revenue CAGR is around 14 percent. While the net profit of the company has almost increase three times with a CAGR of 25 percent for the last five years.
Moreover, margins have increased steadily showing efficiency and continuous hard work of the management. One of the major factors behind this surge is the constant introduction of new products. In 2015 alone the company launched over ten new products. Also, the marketing campaign and branding activities of the company have been up to the mark. Maintaining brand equity and consumer re-call in the segments which they operate is paramount and it is safe to say that Abbott has been successful at it.
Abbott with its 2015 annual result significantly increased its cash dividend pay-out. Previously the company used to pay around Rs 6-7 cash dividend but in 2015 it was increased to Rs 30. This move has been welcomed by investors who are always looking for companies with good dividend yield.
HY16 Snapshot:
During the current year, Abbott has continued on its growth trajectory. The top line of the company grew by 12 percent compared to same period last year. Both domestic and export sales contributed towards the improvement in revenue.
The pharmaceutical and nutrition segments witnessed growth of 9 percent and 15 percent year-on-year, respectively. Diagnostics and other segments grew by an impressive 24 percent. During the period under discussion, Abbott introduced eight new products.
These new product launches increased the expense head by 17 percent.
Share Price Performance:
Abbott' stock (PSX: ABOT) enjoys premium valuation because of being the pharmaceutical sector. The share price has gone up recently, reflecting the performance of the company. Companies within the pharmaceutical sector trade at very high price-earnings ratio (P/E).
The average P/E of this sector is around 25x while the average P/E of the companies within the benchmark KSE-100 index is around 9. Recently the trading volume in Abbott's stock has picked up as the company is reporting growth in earnings each quarter. Foreign interest in pharmaceuticals is also very high now especially after the MSCI upgrade.
Shareholding Pattern:
Abbott Pakistan's majority holding is with the parent company, which is around 78 percent of the total outstanding shares. Rest of the holding is with general public around 9.4 percent and mutual funds around 4.4 percent.
Being a bluechip company, Abbott's stock is also a favourite for pension and provident funds. These funds have bought the stock implying full trust in the ability of the company to keep generating steady returns for its shareholders.
Future Outlook:
The outlook for Abbott Laboratories Pakistan looks very good. The company has shown exemplary performance over the past few years and there is no reason why it won't continue. The pharmaceutical sector is one of the fastest growing sectors of the economy. With GDP growth coming in and disposable incomes rising, the spending on these health care products will only continue to increase.