Shares of Natco Pharma have lost close to 36 percent of their value so far in 2022. The stock has been declining since it hit a 52-week high of ₹944 on January 17, 2022, and it has dropped 38.35 percent to date.
In the previous trading session, the stock fell nearly 2 percent, setting a new 52-week low of ₹545 after the company announced that Bristol-Myers Squibb, Teva, and Natco have been named defendants in an antitrust lawsuit in the US by Walgreens Co. regarding Lenalidomide (Revlimid). However, Natco believes this matter is without merit.
Even after hitting a one-year low, domestic brokerage firm ICICI Securities remains bullish on the stock and has a ‘buy’ call with a target price of ₹816 per share, implying an upside of 39.29 percent from the current market price.
The brokerage also raised its revenue estimates by 3 percent and EPS estimates by 2-5 percent over FY23E–FY24E to factor in currency appreciation in exports.
The brokerage said that the company has missed all of its estimates for the September quarter, including revenue, net profit, and EBITDA margin. However, it added that apart from Revlimid, Natco has a robust pipeline of multiple limited-competition products such as Imbruvica, Aubagio, Kyprolis, and Pomalyst, which will continue to drive US growth supported by traction in Afinitor and Sorafenib.
In addition, the domestic business is likely to be propelled by new launches and potential inorganic opportunities. The CTPR (Chlorantraniliprole) launch would provide some immediate assistance, it said.
For the September quarter, the company reported a 12.74 percent drop in its consolidated net profit to ₹56.8 crore, compared to a net profit of ₹65.1 crore in the corresponding quarter of last year.
Revenue from operations increased 9 percent to ₹452.6 crore in the September quarter from ₹415.2 crore in the year-ago quarter. However, sequentially, the revenue was down 50.74 percent.
It reported an operating profit of ₹95.3 crore in Q2, down by 75.89 percent when compared to ₹395.3 crore in the preceding quarter. The company had posted a ₹70.5 crore operating profit in Q2 FY22.
The operating profit margin during the quarter stood at 22.06 percent, compared to 44.69 percent in the preceding quarter and 18.69 preceding in Q2FY22.
ICICI said that the export formulation revenues delivered growth of 48.8 preceding YoY on a suppressed base. Revlimid sales were minimal during the quarter (as guided by management in Q1FY23) but will pick up in the next cycle starting in Q4FY23.
Ex-Revlimid, US business saw a sharp decline in QoQ due to slow traction in recent launches and price erosion. However, delay in competition for generic Copaxone, the ramp-up in Nexavar, Afinitor and potential high-value launches would support US revenue in coming quarters, the brokerage added.
An average of 14 analysts polled by MintGenie have a 'hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.