My opinion on Abbott: I think it fits the category: Heads, I Win; Tails, I Don’t Lose Much.
Abbott has the resources (97% of the shareholder’s equity is in cash) to grow faster. However, their growth plans whether inorganic or new launches are dictated by the parent company who will not heed to our wishes. Hence, expectation of higher growth rate is misplaced.
Their current portfolio could grow FCFs @10% (similar to sales growth, which has the lowest growth rate among Operating Profit, PAT and FCF) in the Long Term (20Yrs.) due to inflation, deeper tier penetration, and demographics. Seeing the evolution of the B/S till date, I feel that this much growth would come without utilizing capital from the shareholder’s equity.
As of today, company sells at 58xFCF [822 Cr. (3 Yr. Av.)]. With a horizon of 20 Yrs., returns would still be better than FD even if multiple becomes half. In case multiple holds and growth rate accelerates, returns will be better.
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