StoxBox: Buy Natco Pharma for 16% Upside in 12 Months

StoxBox: Buy Natco Pharma for 16% Upside in 12 MonthsStoxBox has given Natco Pharma a “Buy” rating, valuing the company at 14 times FY24e earnings, arriving at a target price of INR 1,392, representing a 16% upside from the current market price with a 12-month investment horizon.

Leading Indian research and development firm Natco Pharma reported its highest-ever consolidated revenue and earnings in FY24. Manish Chowdhury, StoxBox’s Head of Research, says: “The company targets 15-20% topline growth for FY25, and it is projected to continue growth by concentrating on specialty, high-potential compounds. The company’s success may be attributed in large part to its robust formulation business, new agriculture brands, niche molecular introductions, and US price stabilisation. Within the pharmaceutical sector, Natco Pharma stands out due to its strategic focus on complex generics and specialty compounds.”

Natco Pharma, a leading pharmaceutical company, has a strong pipeline targeting cancer, pharmaceutical specialties, cardiology, and diabetology. Domestic formulations account for 10% of sales in FY24, while export formulations account for 78%. The company’s API business contributes 8% of sales, while the Crop Health Sciences division accounts for 4%. With five facilities and R&D centers, Natco Pharma is well-positioned for future growth.

Manish Chowdhury emphasized: “The company’s international formulations business has shown remarkable performance, particularly with the success of gRevlimid. We expect this momentum to continue, driven by new launches and geographical expansion.”

The agrochemical segment is set to triple its revenue to INR 300-400 crores in the next three years, driven by new product launches and targeted advertising in key states. Despite a recent setback, the segment is poised for recovery from Q1FY25 onwards.

Manish added: “Natco’s foray into the agrochemical sector, coupled with its innovative product pipeline, is expected to drive significant growth. The company’s strategic investments and brand-building efforts will play a crucial role in its success.”

Natco Pharma’s strategic focus on complex and niche pharmaceuticals, geographical expansion, and potential acquisitions underpins its robust growth outlook. Investors can expect consistent performance and substantial returns, making Natco Pharma a compelling buy in the current market

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