Sunday, June 29, 2008

Stock Idea - Abbott India - Update

CMP - 550
Sensex - 13802

In my earlier post I had recommended Abbott India. The stock has since moved up by 2 % as compared to the Sensex which has lost 16 % in the same period.

The buyback through the form of a tender offer which I had stated in my blog has finally received SEBI approval. The buyback of 5.83% of the equity of the company will happen at Rs 650 per share.

The company also announced its Q2 results. Sales was up from 157 crores in Q2 07 to 170 crores in Q208, a rise of 8%. Profits however remained flat at 18 crores with cost pressures kicking in.

The company will however deliver EPS growth because of reduction in the equity capital post the buyback.


Mahendra Naik said...

Hi Ninad,

I agree with you on Pharma MNC'. Once the darlings of our markets because of liberal bonus policies, they have become the new value buys with some of them offering dividend yields of 6-7 %. But I would like to guess what will be the price drivers ahead, because you cannot bank on dividend alone. I think it could well be buybacks by parent companies to delist. Glaxo Pharma & Bayer Cropscience look good in this pack with both having strong pipelines of new products and the later could be benefited by the current agri boom.

Ninad Kunder said...

Hi Mahendra

If you read my original post, the driving philosphy for Abbott as opposed to the other MNC pharma companies was the parent's philosphy of buying back shares both worldwide and in India.

Beyond the dividend yeild, the company is buying back about 5% of its equity capital every year enhancing EPS.

Like I always say the key in a value stock is not finding cash on the balance sheet, it is figuring out what the mgmt will do with that cash.