Buy Natco Pharma - HDFC Securities

Natco Pharma Ltd (NPL) has emerged as the leader in the niche segment of oncology in India. With more than a dozen key products in the portfolio, the company has built a formidable presence in oncology.

NPL has built a formidable portfolio of ANDA filings in the US (23 filed), driven by strong analytical and characterizations capabilities. The portfolio includes two most complex blockbuster drugs Revlimid and Copaxone. However, adverse ruling in Copaxone (USD3bn revenues) will limit the upside for NPL from g Copaxone launch, even as management believes it to be an attractive opportunity.

The company expects FY13 to be a very exciting year and with product approvals; revenues will get a good boost. Further, the company is also considering additional launches in the oncology segment and other therapeutic segments to augment its revenues and profitability. NPL is also looking towards establishing itself in new niche markets such as Brazil, Venezuela etc.

The US pharmacy business is likely to see flat revenues, and its divestment would be a strong positive. We think one can buy NPL at CMP of Rs.437.4 and add on dips between Rs.395 – Rs.410 (13.5-14x FY13E EPS of Rs.29.3) for a target of Rs.498 (17x FY13E EPS) over the next 1-2 quarters.

Source : Equity Bulls

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