Natco Pharma

Natco Pharma reported consolidated revenue of Rs. 563.40 cr up 14.4% Y-o-Y basis from Rs. 492.30 cr reported in Q1 FY20. Increase in revenue was on account of increase in exports and formulations business. EBITDA for the quarter stood at Rs. 171.10 cr down 10.6% Y-o-Y basis with EBITDA margins of 30.4% in Q1 FY21. The company reported PAT of Rs. 122.10 cr down 14.5% Y-o-Y basis. Profitability was impacted primarily due to lower oncology segment revenue during the quarter. Natco Pharma also declared an interim dividend of Rs. 1.25 per share for the quarter ended June, 2021.

The management is confident of achieving 25% eps growth in the current financial year based on order book and product pipeline outlook. However, sales mix in the coming quarter could impact the margins this financial year. Taking 25% eps growth values the company at 25.9x E FY21 earnings of ~Rs. 572 cr which is a premium valuation to its competitors. However, there are various green shoots such as Revlimid and other agro chemical products which put the company in better position to achieve higher profitability FY22 onwards. We opine investors to Buy based on management’s ability to carve out niche in each business segment it operates with a horizon of 18 - 24 months.