ICICI Direct is bullish on Natco Pharma has recommended buy rating on the stock with a target price of Rs 950 in its research report dated August 13, 2020.
ICICI Direct's research report on Natco Pharma
Q1FY21 revenues grew 14.4% YoY to Rs 563 crore. Export formulations grew 13.8% YoY to Rs 274 crore. Domestic formulations de-grew 23.4% YoY to Rs 126 crore as the oncology segment continued to be impacted by lower hospitalisation rate amid pandemic. API segment sales doubled YoY to Rs 144 crore. EBITDA margins fell 849 bps YoY to 30.4% due to significantly lower gross margin following a change in product mix towards margin dilutive products that was partly offset by lower employee cost and other expenditure. Subsequently, EBITDA de-grew 10.6% YoY to Rs 171.1 crore. Net profit de-grew 14.2% YoY to Rs 122.8 crore.
The growth trajectory is likely to improve from FY22 onwards as the new strategy settles down. We ascribe a target price of Rs 950, which includes base business value of ~Rs 653 (22x FY22E EPS of Rs 29.7) + Rs 297 for NPV of FTF/Para IVs in US.
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