ICICI Securities's research report on Natco Pharma
Natco’s Q2FY26 result was ahead of our expectations, driven by higher supplies of gRevlimid which would fade away in H2FY26; management guides for profitability to drop to INR 2.75-3bn in H2 (vs. INR 10bn in H1). Management maintains PAT guidance of INR 13bn for FY26. Natco has completed the acquisition of 35.75% stake in SA-based Adcock Ingram for ~INR 20bn in Nov’25 and shall consolidate it as an associate company. Cash balance of INR 27.3bn post this transaction will be deployed towards R&D and M&A to strengthen the base biz. Near-term pipeline for US includes smaller products and meaningful launches are lined up in FY28. However, in the near term, semaglutide and other launches in Brazil, India and a few other markets may boost profitability of base biz.
Outlook
We retain REDUCE and revise TP to INR 750 based on 17x FY27E EPS of core biz, NPV of INR 100/share for exclusive products, and INR 137/share for cash.
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