ICICI Direct recommended hold rating on Natco Pharma with a target price of Rs 635 in its research report dated February 14, 2019.
ICICI Direct's research report on Natco Pharma
Q3FY19 results were higher than I-direct estimates on all fronts. Revenues de-grew 1% YoY to Rs 556.7 crore (I-direct estimate: Rs 534.7 crore) on the back of high base of Oseltamivir (flu) in the US EBITDA margins were at 37.4% against 51.0% in Q3FY18 (I-direct estimate: 35.4%) mainly due to high base of gOseltamivir (flu) in the US. EBITDA de-grew 27.3% YoY to Rs 208.4 crore against I-direct estimates of Rs 189.2 crore Net profit de-grew 26.7% YoY to Rs 159.5 crore (I-direct estimate: Rs 151.7 crore), in line with the operational performance.
We value the stock on an SOTP basis. Accordingly, we arrive at our new target price of Rs 635, which includes base business value of ~Rs 440 (25x FY21E EPS of Rs 17.7) + ~Rs 195 for NPV of FTF/Para IVs in the US.
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