Natco Pharma Ltd. is a vertically integrated pharmaceutical company with focus on niche therapeutic areas and complex products in Finished Dosage Formulations (FDF) and Active Pharmaceutical Ingredients (APIs). Natco has six manufacturing facilities spread across India with dedicated modern research laboratories and capabilities in new drug development. The Company is a leading player in India’s generic oncology space.
Valuation and View
We expect Natco’s revenue and adj. PAT to grow at a CAGR of 37.7% & 51.6% respectively over FY15-18E. We further expect improvement in operating margins by 880bps to 34.7% on account of key launches (more than 50% of the filings in the pipeline are Para IV and FTF opportunities) in FY17E and increased revenues from oncology and gSovaldi sales in domestic market. Hence, we initiate Natco with BUY rating with a TP of Rs. 599 at 20x FY18E earnings.
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