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Target: ₹704
CMP: ₹580
Natco Pharma is an India-based vertically integrated and R&D focused enterprise, engaged in developing, manufacturing and marketing finished dosage formulations and active pharmaceutical ingredients and intermediates.
Natco witnessed 67 per cent revenue growth in H1-FY23, owing to robust Revlimid sales.
EBITDA margins expanded 1436 bps to 37 per cent in H1-FY23 from 23 per cent in H1FY22 led by strong contribution from export formulations.
Export formulation business registered a 204 per cent growth in H1FY23 with revenues at ₹1,020 crore. Brazilian and Canadian subs, backed by strong new launches, have reported robust growth with 40-50 per cent share in profitability.
In the Crop Health Science Division, the CTPR (Chlorantraniliprole) associated products which were launched are expected to drive earnings in the near-term.
We expect Natco’s revenue and operating performance to improve on the back of a strong agro sales, focus on US front end business, increased R&D and new launches of niche molecules with high entry barriers. The sale of Revlimid and CTPR promises strong growth in terms of revenue and profitability in the near term.
Hence, we upgrade our rating to a Buy with a target price of ₹704 based on 16x FY24 EPS.
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