Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Natco Pharma - Weak quarter; set for strong FY22 - ICICI Securities

Posted On: 2021-06-21 16:24:11 (Time Zone: UTC)


Natco Pharma's (Natco) Q4FY21 performance was much lower than estimates with a miss in India and US revenues. Additionally, weak flu season impacted sales from Tamiflu. Revenue declined 27.2% to Rs3.3bn while adjusted PAT dropped 43.7% to Rs530mn (I-Sec: Rs1.0bn). EBITDA margin was also down 520bps YoY to 23.0% due to low revenue. Continued pressure on domestic oncology segment and negligible Tamiflu sales in US were key reasons for weak quarter. However, this doesn't change the FY22-FY23 outlook materially in terms of key product opportunities like Revlimid, Nexavar, Everolimus, etc. Agro-chemical business is likely to become a new revenue segment over next few years and capex for it is complete. Considering recent rally in stock which has factored in these upsides, we downgrade Natco to HOLD from Add.

- Revenue miss across businesses: Export formulation revenue (primarily from the US) was down 21.0% due to absence of Tamiflu sales on account of weak flu season and lack of new launches. Quarterly revenue run-rate has generally been volatile but we believe revenue should revert to ~Rs2-3bn in Q1FY22. We expect delay in competition for generic Copaxone would support the US revenue run rate. RoW markets (Canada & Brazil) revenue would gradually ramp-up aided by new launches including Revlimid. Domestic revenue declined 19.4% YoY due to lower hospital occupancies for cancer treatment and declining Hep-C sales. The business is likely to recover with pick-up in hospital occupancies and chemo-therapy treatments with increasing patient footfalls. Launch of agro-chemical and COVID-19 linked products in the coming months would also support domestic revenue.

- Lower revenue impacted margins, likely to recover in FY22E: EBITDA margin dropped 520bps YoY to 23.0% on account of significant decline in revenue. However, with gradual pick-up in revenue and high quality product launches (Everolimus, Sorafenib, etc.) in FY22E would aid EBITDA margin reversion to ~30%. We believe base EBITDA margin would remain stable at ~30% in the near future.

- Outlook strong: We expect domestic oncology business to recover materially in FY22E coupled with high value launches in US which would support export sales. Favorable court ruling in agro-chem product chlorantraniliprole (CTPR) would help in ramping-up agro chemical business. We expect 31.1% revenue and 68.9% PAT CAGR over FY21-FY23E including Revlimid sales in FY23E. We raise revenue and earnings by 4-5% in FY23E with incremental sales in the agro-chem business.

- Valuations and risks: We remain positive on the company's business with improving visibility of growth. However, considering recent stock rally which has capped the upside, we downgrade Natco to HOLD from Add with a SoTP-based target of Rs1,109/share (earlier: Rs885/share) including NPV of Rs297/share for Revlimid and Rs77/share for Imbruvica. Key downside risks: Delay in US launches and early competition in Copaxone. Key upside risks: Swift ramp up in US launches and better than estimated revenue in the agro-chem segment.

Shares of NATCO PHARMA LTD. was last trading in BSE at Rs.1098.05 as compared to the previous close of Rs. 1095.15. The total number of shares traded during the day was 15933 in over 1161 trades.

The stock hit an intraday high of Rs. 1115.05 and intraday low of 1072. The net turnover during the day was Rs. 17514755.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.


Other Headlines:

Ambuja Cements Ltd: Q2CY21 Result update - YES Securities

Q1FY22 Result Update - Polycab India - ICICI Direct

Q1FY22 Result Update - Hindustan Zinc - ICICI Direct

Federal Bank - Q1FY22 First Cut - ICICI Direct

Q1FY22 Result Update - Biocon Ltd - ICICI Direct

IPO Review - Glenmark Life Sciences Ltd - ICICI Direct

JSW Steel - Q1FY22 First Cut - ICICI Direct

Crompton Greaves Consumer Electricals - Q1FY22 First Cut - ICICI Direct

Q1FY22 Result Update - CSB Bank - ICICI Direct

SKF India - Q1FY22 First Cut - ICICI Direct

Company Update - Gandhi Special Tubes - ICICI Direct

Q1FY22 Result Update - Hindustan Unilever - ICICI Direct

Q1FY22 Company Update - Mphasis - ICICI Direct

Maintain REDUCE on Hindustan Unilever - Steady performance continues - HDFC Securities

Maintain ADD on Havells India - Robust performance despite the odds - HDFC Securities

Maintain BUY on Bajaj Auto - Laying the ground for future technologies - HDFC Securities

Maintain BUY on UltraTech Cement - UltraHigh! Margin at its best ever; outlook strong - HDFC Securities

ICICI Lombard Report - Not in the pink: spike in health claims affects loss ratio - HDFC Securities

Hindustan Zinc - Higher commodity continues to propel earnings - ICICI Securities

ICICI Lombard General Insurance Company - Q1FY22 Update - ICICI Direct

UltraTech Cement - EBITDA/te inches to highest-ever Rs1,600/te - ICICI Securities

Arvind Fashions Ltd - A step in the right direction - ICICI Securities

CEAT - RM cost pressures likely to stay elevated - ICICI Securities

Hindustan Unilever - (Re) Investing (margins) for growth - ICICI Securities

Mahindra CIE Automotive - Growth outlook remains healthy - ICICI Securities

Bajaj Auto - Tough quarter; export outlook remains solid - ICICI Securities

Mphasis - Q1 FY22 first cut - YES Securities

Can Fin Homes - Q1 FY22 first cut - YES Securities

Sterlite Technologies - Q1 FY22 first cut - YES Securities

IndiaMart - Q1 FY22 first cut (Current Rating: BUY) - YES Securities

Schaeffler Q2CY21 call highlights (Rating: NOT RATED) - YES Securities

CEAT 1QFY22 call highlights (Rating: NOT RATED) - YES Securities

Bajaj Auto 1QFY22 first cut & call highlights (Rating: NOT RATED) - YES Securities

ICICI Lombard - Q1 FY22 Result Report - YES Securities

Hindustan Unilever - Q1 FY22 Result Report - YES Securities

Avenue Supermart - Q1 FY22 Result Report - YES Securities

Ultratech Cement - Q1 FY22 Result Report - YES Securities

Havells India - Q1 FY22 Result Report - YES Securities

Polycab India - Q1 FY22 Result Report - YES Securities

Q1FY22 Result Update - Bajaj Auto - ICICI Direct

Q1FY22 Result Update - Sterlite Technologies - ICICI Direct

Q1FY22 Result Update - UltraTech Cement - ICICI Direct

Biocon - Q1FY22 First Cut - ICICI Direct

Gladiator Stocks - Bharti Airtel - ICICI Direct

Q1FY22 Result Update - Rallis India - ICICI Direct

Q1FY22 Result Update - Havells India - ICICI Direct

Q1FY22 Result Update - Syngene International - ICICI Direct

Sterlite Technologies - Q1FY22 First Cut - ICICI Direct

Bajaj Auto - Q1FY22 First Cut - ICICI Direct

UltraTech Cement - Q1FY22 First Cut - ICICI Direct


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020