Hold Natco Pharma; target of Rs 595: ICICI Direct

ICICI Direct's research report on Natco Pharma

Revenues de-grew 40.6% YoY to Rs 455.7 crore (I-direct estimate: Rs 541.5 crore) on the back of high base of gOseltamivir (flu) in the US. EBITDA margins were at 32.5% against 49.9% in Q4FY18 (I-direct estimate: 33.4%) mainly due to high base of gOseltamivir (flu) in the US. EBITDA de-grew 61.3% YoY to Rs 148.3 crore against I-direct estimates of Rs180.9 crore. Net profit de-grew 59.7% YoY to Rs120.8 crore (I-direct estimates: Rs134.4 crore).

Outlook

he growth trajectory is likely to improve from FY22 onwards as the new strategy settles down. We value the stock on an SOTP basis. Accordingly, we arrive at our new target price of Rs 595, which includes base business value of ~Rs 400 (15x FY21E EPS of Rs 26.7) + Rs 195 for NPV of FTF/Para IVs in the US.