ICICI Direct's research report on Natco Pharma
Natco has, over the years, developed a knack for manufacturing complex generic products with few competitors, especially for the US market. India formulations mainly comprise oncology products (38 brands). For the US, it follows partnership products for risky launches and acquired Dash Pharma for front-end presence. It has six FDF, two API manufacturing facilities and two crop health sciences units • Maiden entry into crop protection was via launch of pheromone product, Natmate PBW for controlling pink bollworm in cotton • FY22 revenue break-up - domestic business: 25%, international business: 62% (mainly from the US), APIs: 13%.
Outlook
We maintain HOLD rating on the stock due to 1) impending competition in gRevlimid in US and lack of other growth drivers, 2) high risk-reward play in crop protection with ~ Rs 100 crore of CTPR inventory and 3) stagnancy in domestic formulations, especially oncology. Valued at Rs 735 (base business at Rs 634 with 15x P/E on FY24E EPS of Rs 42.3 + Rs 100 NPV for gRevlimid).
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