Hold Natco Pharma; target of Rs 955: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Natco Pharma

Revenues grew 31% YoY to Rs 445 crore (I-direct estimate: Rs 396 crore) mainly due to profit sharing from Oseltamivir sales in the US and robust export API sales EBITDA margins improved 801 bps YoY to 30.7% (I-direct estimate: 27.5%) mainly due to a favourable product mix. EBITDA grew 77% to Rs 137 crore (I-direct estimate: Rs 109 crore) Adjusted net profit increased 96% YoY to Rs 93 crore (I-direct estimate: Rs 68 crore) mainly on account of a strong operational performance.

Outlook

Like FY17, Q1 also witnessed a windfall of Oseltamivir profit sharing for which the company enjoyed exclusivity. However, this was partly offset by GST transition impact in domestic sales. Going forward, the Hepatitis C group continues to be the main catalyst for growth. This augurs well in the long run as it will complement the oncology franchisee. Despite possible crowding in the Hepatitis C space, we expect the product to generate significant cash flows from India and other emerging markets. On the exports front, the US would remain a key long term driver base on its strong complex FTF/Para IV filings. We continue to value the stock on an SOTP basis to capture the emerging FTF/limited competition opportunities in the US. Our new target price is ~Rs 955, which includes base business value of ~Rs 400 (25x FY19E EPS of Rs 16) + ~Rs 555 for NPV of other FTF/Para IVs.

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