Natco Pharma - Result Update - ICICI Securities

Q4FY20 revenues remained flat at Rs. 455 crore. Export formulations de-grew 13.3% YoY to Rs. 219 crore due to supply chain issues amid Covid-19. Domestic formulations de-grew 44.8% YoY to Rs. 103 crore due to decline in Hepatitis-C and oncology segment on account of pricing pressure. API segment grew 38% YoY to Rs. 96.4 crore. EBITDA margins declined 433 bps YoY to 28.2% mainly due to change in product mix and lower realisation in the domestic oncology portfolio. EBITDA de-grew 13.5% YoY to Rs. 128.3 crore. Net profit de-grew 22.1% YoY to Rs. 94.1 crore.

Valuation & Outlook

Supply chain issues and continued decline in Hep-C along with pricing pressure in domestic oncology segment impacted Q4. For FY20, gCopaxone (Glatiramer Acetate) remained steady. The next big US approval will be gRevlimid while there are handful of other US approvals and launches lined up. However, given the current trend in US wherein the niche opportunities being specifically targeted by USFDA to encourage more generic players, this funnel is getting squeezed. In this backdrop, the management has further curtailed US scope. At the same time, it is looking at other geographies and businesses (agrochemicals). As per new strategy, specific markets- India, Brazil, Canada, China and agrochemical segment, together are likely to contribute 70-80% of revenues in the next two to three years. This metamorphic shift is likely to see some performance slowdown and fluctuation in the near term. The bright spot for Natco is of course its strong balance sheet besides management's ability to carve out a niche out of the available opportunities. The growth trajectory is likely to improve from FY22 onwards as the new strategy settles down. We ascribe a target price of Rs. 740, which includes base business value of ~Rs. 448 (20x FY22E EPS of Rs. 22.4) + Rs. 292 for NPV of FTF/Para IVs in the US.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Natco_Q4FY20.pdf

Shares of NATCO PHARMA LTD. was last trading in BSE at Rs.626 as compared to the previous close of Rs. 619.5. The total number of shares traded during the day was 7966 in over 784 trades.

The stock hit an intraday high of Rs. 631 and intraday low of 610.8. The net turnover during the day was Rs. 4961398.

Source : Equity Bulls

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