Hold Natco Pharma, target price Rs 649: Anand Rathi
Reported profits are expected to have declined 19 per cent to Rs 982 million.
By ETMarkets.com | Updated:
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Anand Rathi has given a hold rating to Natco Pharma with a target price of Rs 649.
Natco is expected to report weak figures. Revenue is likely to have risen 3 per cent to Rs 4.7 billion on the higher US base; a slump in its domestic business is expected to have continued. Its EBITDA margin is expected to be flat sequentially, at 27 per cent (a 574bp dip year on year) as profit shares from sales of products in the US might provide some support.
The share price moved up by 1.79 per cent from its previous close of Rs 624.80. The last traded price is Rs 636. Incorporated in 1981, Natco Pharma has a market cap of Rs 11367.41 crore.
Investor Rationale
Reported profits are expected to have declined 19 per cent to Rs 982 million. Lower traction in its oncology range and muted HepC sales are likely to result in a ~18 per cent year on year decline in domestic sales to Rs 1.5 billion. The 12 per cent growth in its US business is expected to be on account of receipt of its profit shares from partners.
The Kothur plant of the company had one observation on completion of a pre-approval inspection by the US FDA in March 2020. Natco has an approved (Second Indian manufacturers apart from IPCA) US ANDA for chloroquine, a drug which is being tested for the treatment of Covid-19.
Financials
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 482.20 crore, down -.72 per cent from last quarter sales of Rs 485.70 crore and down -13.38 per cent from last year's same quarter sales of Rs 556.70 crore. The company reported net profit after tax of Rs 104.40 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 48.93 per cent stake in the company as of the fourth quarter ending March 31, 2020, while FIIs held 21.67 per cent, DIIs 10.57 per cent and public & others 18.83 per cent.
Natco is expected to report weak figures. Revenue is likely to have risen 3 per cent to Rs 4.7 billion on the higher US base; a slump in its domestic business is expected to have continued. Its EBITDA margin is expected to be flat sequentially, at 27 per cent (a 574bp dip year on year) as profit shares from sales of products in the US might provide some support.
The share price moved up by 1.79 per cent from its previous close of Rs 624.80. The last traded price is Rs 636. Incorporated in 1981, Natco Pharma has a market cap of Rs 11367.41 crore.
Investor Rationale
Reported profits are expected to have declined 19 per cent to Rs 982 million. Lower traction in its oncology range and muted HepC sales are likely to result in a ~18 per cent year on year decline in domestic sales to Rs 1.5 billion. The 12 per cent growth in its US business is expected to be on account of receipt of its profit shares from partners.
The Kothur plant of the company had one observation on completion of a pre-approval inspection by the US FDA in March 2020. Natco has an approved (Second Indian manufacturers apart from IPCA) US ANDA for chloroquine, a drug which is being tested for the treatment of Covid-19.
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Financials
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 482.20 crore, down -.72 per cent from last quarter sales of Rs 485.70 crore and down -13.38 per cent from last year's same quarter sales of Rs 556.70 crore. The company reported net profit after tax of Rs 104.40 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 48.93 per cent stake in the company as of the fourth quarter ending March 31, 2020, while FIIs held 21.67 per cent, DIIs 10.57 per cent and public & others 18.83 per cent.
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