Natco Pharma stock: To account for the beat, higher gRevlimid, and reduced tax, Nuvama has increased its FY24E and FY25 EPS projections for Natco Pharma by 21% and 12%, respectively; the objective is Rs 1,055.
In Friday’s trading, Natco Pharma Ltd. shares increased 18%, bringing their four-day advance to 26%. The medicine maker’s consolidated earnings increased five times to Rs 212.70 crore in the December quarter from Rs 62.30 crore in the same quarter the previous year, which contributed to the current surge in the stock price. From Rs 513.30 crore YoY to Rs 795.60 crore, total revenue increased. For the quarter, the EBITDA margin increased to 38.4% from 24.7% year over year.
According to Nuvama Institutional Equities, Natco Pharma’s Q3 revenue and Ebitda topped consensus projections by 33% and 84%, respectively, driven by greater gRevlimid share, while RoW improved.
On the BSE, the Natco Pharma shares increased 18.18% to a high of Rs 1,048.15.
Given Natco’s concentration on challenging prospects, a substantial gRevlimid possibility and strong US pipeline olaparib, erdafitinib, semaglutide, etc.—have been unlocked. RoW markets also saw an improvement, with subsidiaries fostering expansion. In addition to investing in cutting-edge technologies like CAR-T, a strong BS opens up chances to pursue inorganic opportunities across industries. We foresee a pickup next year, but we note a softer India and Agrochem in Q3FY24,” Nuvama said.
The local brokerage has increased its projected earnings per share (EPS) estimates for Natco Pharma for the fiscal years 2024 and 2025 by 21% and 12% respectively. This adjustment is made to account for better-than-expected performance, increased revenue from gRevlimid, and reduced taxes.
Natco Pharma stock
Nuvama highlighted that Natco’s opportunity with gRevlimid is unfolding more positively than initially anticipated. This is evident from the substantial outperformance seen in Q3, and it’s anticipated to persist until January 2026. The company is gearing up to meet the heightened demand by increasing its supply volumes.
Nuvama mentioned that beyond FY25, Natco Pharma boasts a strong pipeline in the US market, including several First-to-File (FTF) products like olaparib, semaglutide (particularly the sole FTF in 8mg, in partnership with Viatris), and erdafitinib (with its filing). Additionally, there are promising opportunities with products such as gLonsurf, Yondelis, Calquence, and gKyprolis, among others, which are expected to yield significant returns in the future. Moreover, growth prospects are further augmented by expansions into RoW (Rest of World) markets and contributions from subsidiaries, which have already begun to bolster overall growth.
Natco Pharma stock rose 18% today and 26% in a four-day rise
Nuvama acknowledged the potential for adverse action concerning the Kothur plant and the risk associated with pipeline monetization. However, it believes that these factors are unlikely to significantly impact their estimates. The company remains committed to pursuing complex opportunities aimed at long-term growth.
“With the increasing momentum of gRevlimid and Natco’s pursuit of complex ventures such as CAR-T in India, semaglutide, Olaparib, etc., funded by gRevlimid cash, the long-term prospects are brightening. We value Natco using a Sum of the Parts (SoTP) approach, assigning a multiple of 25x to the base business’s Q3FY26E EPS, resulting in Rs 483 per share. The value of gRevlimid is estimated at INR 380 per share (up from INR 348), and other Phase-4 opportunities at Rs 194 per share (up from INR 187) as we update the valuation to Dec-25E. We maintain our ‘BUY/SO’ rating with a target of Rs 1,055 (previously Rs 980),” it stated.
