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Natco Pharma- Correction overdone, we continue to have faith in quest for blockbusters

ICICIdirect Research 14 Feb 2025 DISCLAIMER

Natco has enjoyed significant windfall from blockbuster global anti-cancer drug Revlimid since FY22. Our estimates suggest that the company generated almost ₹ 3500 crore sales from generic Revlimid during FY22-FY24 and during FY25 and FY26, the company is expected to generate another ~₹ 5000 crore. Effectively, Revlimid accounts for 50-55% of sales and 70-75% of EBITDA.

Revenues de-grew ~39% YoY to ₹ 464 crore crippled by export formulations which de grew 53% to ₹ 286 crore on account of absence of anti-cancer drug Revlimid. EBITDA de grew 90% YoY to ₹ 27.6 crore while EBITDA margins squeezed ~30 per cent to 6%. PAT de grew 38% YoY to ₹ 132.4 crore.

As this opportunity is expected to wane significantly beyond FY26, Natco has already started focusing on the next potential blockbusters where the company intends to challenge the patent or launch the product with mutual understanding with the innovators. The company is now banking on some new FTF opportunities, notably gOzempic (Anti-diabetic), gWeovy (Weight management) and gLynparza (Anti-cancer) among others. The management is confident on the prospects of some of these products to maintain the blockbuster traction beyond FY26.

We continue to have faith in Natco’s ability to focus on blockbusters which are capable of generating robust cash flows for 3-5 years horizon before they fade. Our Target price is ₹ 1305.

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