ICICI Direct is bullish on Natco Pharma has recommended buy rating on the stock with a target price of Rs 740 in its research report dated June 19, 2020.
ICICI Direct's research report on Natco Pharma
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.
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.
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