Natco Pharma Ltd
Natco Pharma Ltd
HealthcareNATCO Pharma Limited (NATCO) is a vertically integrated, research and development focused pharmaceutical company engaged in developing, manufacturing, and marketing complex products for niche therapeutic areas. [1] NATCO has established its presence in all three business segments viz. finished dosage formulations (“FDF”), active pharmaceutical ingredients (“APIs”), Contract Manufacturing Business.[2]
Natco Pharma trades at an attractive PE of 11.3x with strong long-term profit CAGR of 25-28%, but recent TTM sales decline of -8% and profit degrowth of -25% signal near-term headwinds. The debt-free balance sheet provides safety, but analyst consensus is split equally between buy, hold, and sell, warranting a cautious approach.
Key Fundamentals
SmallcapPharmaceuticalsHealthcareTechnical Indicators
Key Insights
Strengths
2- Company is almost debt free.
- Company has delivered good profit growth of 27.7% CAGR over last 5 years
Weaknesses
1- Tax rate seems low
Growth Rate
AI Analysis — Bull vs Bear
anthropic claude-opus-4.6 1d agoNatco Pharma trades at an attractive PE of 11.3x with strong long-term profit CAGR of 25-28%, but recent TTM sales decline of -8% and profit degrowth of -25% signal near-term headwinds. The debt-free balance sheet provides safety, but analyst consensus is split equally between buy, hold, and sell, warranting a cautious approach.
- Trades at a compelling PE of 11.3x, significantly below pharma sector average of 25-30x, offering valuation comfort
- Company is almost debt-free, providing strong balance sheet resilience and financial flexibility
- Delivered robust compounded profit growth of 28% CAGR over 5 years, demonstrating earnings power
- 10-year compounded sales CAGR of 15% shows consistent long-term revenue growth trajectory
- 3-year ROE of 23% indicates efficient capital allocation and strong return generation
- Price-to-book ratio of 1.73x is reasonable for a pharma company with 19% 5-year average ROE
- 5-year compounded profit CAGR of 28% significantly outpaces 5-year sales CAGR of 15%, indicating margin expansion
- Market cap of Rs 16,328 Cr positions it as a credible mid-cap pharma with scale advantages
- TTM sales have declined -8%, signaling potential revenue erosion or loss of key product exclusivities
- TTM profit has dropped -25%, a sharp deterioration from the 26% 3-year CAGR, indicating earnings cliff
- Analyst consensus is deeply divided with only 33% recommending buy, 33% hold, and 33% sell
- 5-year stock CAGR of -4% shows the market has not rewarded shareholders despite strong profit growth
- ROE has declined from 23% (3-year) to 17% (last year), suggesting deteriorating return profile
- Dividend yield of just 0.56% offers minimal income support despite being debt-free with strong cash flows
- 1-year stock CAGR of only 3% underperforms broader market indices, reflecting weak sentiment
- Low tax rate flagged as a concern — potential risk of tax normalization impacting future net profits
This is AI-generated analysis, not financial advice. Do your own due diligence.
AI News Digest
anthropic claude-opus-4.6 14h ago- Stock crashes 20% in 2 days May 29
Shares plummeted 20% in two trading sessions to ₹943, a 24% correction from the 52-week high of ₹1,226.10 hit on May 12, with volumes surging six-fold to 2.21 million shares indicating heavy selling pressure.
- Q4 profit drops 64% YoY May 29
Q4FY26 consolidated net profit fell 63.6% YoY to ₹180 crore while revenue declined 36.5% to ₹816.90 crore, with EBITDA crashing 72.5% to ₹160 crore and EBITDA margin contracting from 45% to 21.3%.
- FY27 guidance signals steep degrowth May 29
Management guided FY27 revenue at ₹3,400-3,500 crore (20-25% de-growth) and PAT of ₹700-750 crore (45-50% de-growth) due to complete absence of gRevlimid and no major US launches.
- Pharma segment revenue down 41% May 29
Revenue from the pharmaceuticals business fell 40.58% YoY to ₹716.5 crore in Q4FY26, reflecting the loss of key revenue streams from exclusive product opportunities.
- FY26 full-year profit falls 25% May 29
Full-year consolidated net profit declined 25% to ₹1,418.5 crore from ₹1,883.4 crore, with annual revenue dropping to ₹4,375.9 crore from ₹4,784 crore in FY25.
- FY28 PAT growth guided 15-25% May 29
Management expects FY28 recovery with 15-25% PAT growth driven by traction in Canada, Brazil, India, and niche US launches, backed by a pipeline of 28 para-IVs with 20 first-to-file opportunities.
- ₹2,500 crore cash for M&A May 29
Company holds a cash pile of ₹2,500 crore and management has expressed willingness for ex-India M&A to drive inorganic growth.
- Agro chemicals up 51% YoY May 29
Revenue from the agro chemicals segment increased 50.66% YoY to ₹716.5 crore in Q4FY26, providing diversification beyond the pharma business.
- Semaglutide and Adcock pipeline May 29
Growth pickup expected in FY28 from semaglutide launches in select markets, contribution from Adcock acquisition, and future exclusivity opportunities over next 3-5 years.
- ICICI holds with ₹1,000 target May 29
ICICI Securities maintains a HOLD rating with a revised target price of ₹1,000 based on 18x FY28E EPS plus NPV of ₹100/share for exclusive products.
- One-time ₹115 crore tax benefit May 29
Natco recognized a one-time tax benefit of ₹115 crore in FY26, partially cushioning the reported profit decline.
- Valuation at P/E 11.6x, P/B 2.1x May 29
Stock trades at a P/E of 11.61 and P/B of 2.06 with market cap at ₹18,072 crore, still showing 17.89% gains over the last year despite the recent correction.
TL;DR: Natco Pharma is facing a sharp earnings cliff as gRevlimid exclusivity benefits roll off, with Q4 profit down 64% and FY27 guided for 45-50% PAT de-growth. The stock has corrected 24% from its highs in response. On the positive side, the company holds ₹2,500 crore in cash and has a strong pipeline of 28 para-IV filings that could drive 15-25% PAT growth in FY28. The trend is clearly deteriorating near-term, but FY27 appears to be a trough year with recovery visibility emerging from FY28 onward.
Quarterly Results
| Mar 2023 | Jun 2023 | Sep 2023 | Dec 2023 | Mar 2024 | Jun 2024 | Sep 2024 | Dec 2024 | Mar 2025 | Jun 2025 | Sep 2025 | Dec 2025 | Mar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales | 898 | 1,140 | 1,031 | 759 | 1,068 | 1,363 | 1,371 | 475 | 1,221 | 1,329 | 1,363 | 647 | 739 |
| Expenses | 559 | 612 | 573 | 490 | 571 | 558 | 567 | 436 | 673 | 758 | 784 | 489 | 612 |
| Operating Profit | 339 | 528 | 458 | 268 | 497 | 805 | 804 | 39 | 548 | 571 | 579 | 159 | 128 |
| OPM % | 38% | 46% | 44% | 35% | 47% | 59% | 59% | 8% | 45% | 43% | 42% | 25% | 17% |
| Other Income | 29 | 20 | 29 | 37 | 42 | 48 | 64 | 176 | 66 | 62 | 100 | 58 | 78 |
| Interest | 3 | 4 | 4 | 5 | 6 | 5 | 4 | 4 | 10 | 3 | 13 | 10 | 11 |
| Depreciation | 41 | 44 | 44 | 44 | 56 | 44 | 46 | 47 | 98 | 58 | 52 | 46 | 50 |
| PBT | 324 | 500 | 440 | 256 | 478 | 804 | 818 | 164 | 506 | 572 | 614 | 161 | 144 |
| Tax % | 15% | 16% | 16% | 17% | 19% | 17% | 17% | 19% | 20% | 16% | 16% | 13% | -62% |
| Net Profit | 276 | 420 | 369 | 213 | 386 | 668 | 676 | 132 | 406 | 480 | 518 | 151 | 269 |
| EPS in Rs | 15.11 | 23.47 | 20.6 | 11.88 | 21.57 | 37.32 | 37.81 | 7.43 | 22.7 | 26.84 | 28.94 | 8.46 | 14.96 |
Profit & Loss
| Mar 2015 | Mar 2016 | Mar 2017 | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 | Mar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales | 825 | 1,042 | 2,020 | 2,185 | 2,094 | 1,915 | 2,052 | 1,945 | 2,707 | 3,999 | 4,430 | 4,078 |
| Expenses | 615 | 777 | 1,337 | 1,256 | 1,300 | 1,332 | 1,446 | 1,681 | 1,772 | 2,245 | 2,234 | 2,642 |
| Operating Profit | 210 | 266 | 683 | 928 | 795 | 583 | 606 | 264 | 936 | 1,754 | 2,196 | 1,436 |
| OPM % | 25% | 25% | 34% | 42% | 38% | 30% | 30% | 14% | 35% | 44% | 50% | 35% |
| Other Income | 0 | 12 | 14 | 40 | 130 | 107 | 104 | 99 | 105 | 126 | 354 | 298 |
| Interest | 32 | 23 | 18 | 15 | 19 | 22 | 13 | 18 | 14 | 19 | 24 | 37 |
| Depreciation | 47 | 51 | 54 | 66 | 81 | 100 | 117 | 143 | 164 | 187 | 235 | 207 |
| PBT | 132 | 204 | 624 | 887 | 825 | 569 | 580 | 202 | 862 | 1,674 | 2,291 | 1,491 |
| Tax % | 1% | 24% | 22% | 22% | 22% | 19% | 24% | 16% | 17% | 17% | 18% | 8% |
| Net Profit | 130 | 156 | 485 | 695 | 642 | 458 | 442 | 170 | 715 | 1,388 | 1,883 | 1,418 |
| EPS in Rs | 8.1 | 9.02 | 27.88 | 37.74 | 35.24 | 25.31 | 24.18 | 9.31 | 39.18 | 77.51 | 105 | 79.2 |
| Div. Payout % | 12% | 14% | 24% | 22% | 18% | 27% | 22% | 48% | 14% | 12% | 6% | 6% |
Balance Sheet
| Mar 2015 | Mar 2016 | Mar 2017 | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 | Mar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity Capital | 33 | 35 | 35 | 37 | 36 | 36 | 36 | 36 | 36 | 36 | 36 | 36 |
| Reserves | 813 | 1,261 | 1,614 | 3,035 | 3,452 | 3,737 | 4,085 | 4,227 | 4,837 | 5,817 | 7,571 | 9,185 |
| Borrowings | 312 | 113 | 222 | 173 | 386 | 316 | 268 | 416 | 167 | 371 | 279 | 714 |
| Other Liabilities | 226 | 413 | 446 | 470 | 428 | 498 | 403 | 430 | 617 | 682 | 744 | 1,139 |
| Total Liabilities | 1,384 | 1,822 | 2,318 | 3,715 | 4,303 | 4,588 | 4,792 | 5,109 | 5,657 | 6,906 | 8,631 | 11,074 |
| Fixed Assets | 710 | 710 | 833 | 1,019 | 1,227 | 1,584 | 2,023 | 2,312 | 2,427 | 2,491 | 2,698 | 2,803 |
| CWIP | 129 | 212 | 336 | 480 | 638 | 518 | 223 | 130 | 64 | 137 | 225 | 294 |
| Investments | 2 | 22 | 32 | 76 | 169 | 112 | 304 | 308 | 392 | 539 | 474 | 3,127 |
| Other Assets | 543 | 878 | 1,116 | 2,140 | 2,270 | 2,373 | 2,242 | 2,360 | 2,774 | 3,739 | 5,234 | 4,850 |
| Total Assets | 1,384 | 1,822 | 2,318 | 3,715 | 4,303 | 4,588 | 4,792 | 5,109 | 5,657 | 6,906 | 8,631 | 11,074 |
Cash Flow
| Mar 2015 | Mar 2016 | Mar 2017 | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 | Mar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating | 93 | 112 | 346 | 464 | 669 | 417 | 299 | 46 | 849 | 1,212 | 1,697 | 1,768 |
| Investing | -120 | -176 | -299 | -1,116 | -611 | -175 | -107 | 4 | -465 | -1,026 | -1,436 | -2,082 |
| Financing | 29 | 154 | -48 | 651 | -51 | -251 | -186 | 35 | -363 | -247 | -211 | 298 |
| Net Cash Flow | 2 | 90 | -1 | -2 | 7 | -8 | 6 | 85 | 21 | -62 | 50 | -16 |
| Free Cash Flow | -25 | -44 | 66 | 57 | 225 | 81 | 92 | -142 | 674 | 855 | 1,300 | 1,379 |
| CFO/OP | 55 | 60 | 69 | 72 | 107 | 90 | 71 | 36 | 110 | 85 | 94 | 151 |
Ratios
| Mar 2015 | Mar 2016 | Mar 2017 | Mar 2018 | Mar 2019 | Mar 2020 | Mar 2021 | Mar 2022 | Mar 2023 | Mar 2024 | Mar 2025 | Mar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debtor Days | 85 | 92 | 86 | 106 | 88 | 105 | 73 | 116 | 115 | 109 | 103 | 79 |
| Inventory Days | 331 | 482 | 213 | 389 | 545 | 534 | 570 | 496 | 432 | 357 | 405 | 480 |
| Days Payable | 189 | 372 | 160 | 239 | 224 | 244 | 104 | 105 | 153 | 120 | 145 | 216 |
| Cash Conversion Cycle | 228 | 202 | 138 | 257 | 410 | 395 | 539 | 507 | 394 | 345 | 362 | 343 |
| Working Capital Days | 25 | 97 | 71 | 215 | 207 | 295 | 246 | 256 | 198 | 151 | 151 | 163 |
| ROCE % | 17% | 18% | 39% | 35% | 23% | 14% | 13% | 4% | 18% | 30% | 33% | 17% |
Documents
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Company Information
NATCO Pharma Limited (NATCO) is a vertically integrated, research and development focused pharmaceutical company engaged in developing, manufacturing, and marketing complex products for niche therapeutic areas. [1] NATCO has established its presence in all three business segments viz. finished dosage formulations (“FDF”), active pharmaceutical ingredients (“APIs”), Contract Manufacturing Business.[2]