Natco Pharma, a leading player in the pharmaceutical industry, has been making waves in the stock market, with its share price soaring nearly 8% in morning trading following the release of its impressive Q4 results.
Known for manufacturing active pharmaceutical ingredients and finished dosage formulations, Natco Pharma’s recent performance highlights its strategic focus and strong position in the market.
Let’s delve into the details behind Natco Pharma’s stellar performance and what it means for investors.
A strong start to the week
Natco Pharma’s share price on the BSE opened at ₹1108.95, significantly higher than the previous close of ₹1029.20, reaching its 52-week high. On the NSE, the share price briefly touched ₹1100. With today’s gains, Natco Pharma’s share price has risen almost 70% in the past year, providing substantial returns to investors.
Robust financial performance in Q4
Net profit soars
Natco Pharma’s net profit for Q4 FY24 saw a significant jump, reaching ₹386.3 crore, a 40% increase from ₹276 crore in the same period last year. This represents an 81% surge from the ₹212.7 crore reported in the December 2023 quarter.
Revenue growth
The company’s revenue from operations also showed a healthy increase, climbing 19% year-on-year to ₹1,068.3 crore from ₹898 crore in the corresponding period last year. Strong sales in the pharmaceutical segment primarily drove this growth.
EBITDA improvement
Earnings before interest, tax, depreciation, and amortisation (EBITDA) for Q4 FY24 climbed 46.6% to ₹497.3 crore, up from ₹339.2 crore in the same quarter last year. This improvement resulted in an EBITDA margin of 46.6%, a notable increase from 37.8% in the previous fiscal year.
| (in Rs. Cr.) | MAR ’24 | DEC ’23 | SEP ’23 | JUN ’23 |
| Net Sales/Income from operations | 964.80 | 625.30 | 930.50 | 1,048.30 |
| Total Income From Operations | 964.80 | 625.30 | 930.50 | 1,048.30 |
| Other Income | 35.90 | 29.50 | 24.70 | 14.60 |
| P/L Before Tax | 432.50 | 223.60 | 424.00 | 475.20 |
| Tax | 83.40 | 31.60 | 63.80 | 69.90 |
| P/L After Tax from Ordinary Activities | 349.10 | 192.00 | 360.20 | 405.30 |
Quarterly results of Natco Pharma
Full-year performance
Consolidated revenue and profit
For the fiscal year ending March 31, 2024, Natco Pharma reported consolidated total revenue of ₹4,126.9 crore, a substantial 46.8% increase from ₹2,811.7 crore in the previous year. The consolidated net profit also saw a significant rise, reaching ₹1,388.3 crore, up 94.1% from ₹715.3 crore in the prior year.
Challenges in domestic operations
Despite the strong overall performance, the company’s domestic business operations faced a one-time expense of ₹90 crore, impacting revenue and profitability.
The crop health sciences (CHS) division, in particular, encountered challenges due to a tough crop season, resulting in stock returns being ₹25 crore less than expected and setting aside ₹30 crore to cover potential losses related to assets like inventory or equipment.
What’s driving the growth?
Pharmaceutical segment
Natco Pharma’s pharmaceutical segment revenue rose sharply by 23% year-on-year to ₹1,074.6 crore, driven by the success of complex and niche molecules in the US market. The company has been benefiting from strong sales of generics, including Revlimid.
Upcoming products, such as generics of olaparib, erdafitinib (oncology drugs), and semaglutide (diabetes treatment), are expected to further aid in growth.
Domestic market
Natco Pharma’s new launches, such as Trombonat in June 2023, have performed well in the domestic market. According to Pharmatrack data, the moving average twelve-month sales until April 2024 crossed the ₹10 crore mark, standing at ₹14 crore.
The domestic portfolio showed strong double-digit growth in both value (46.3%) and volume (29.7%).
Agrochemical segment
The agrochemical segment, however, faced headwinds due to inventory destocking and a weak monsoon season last year. This segment has been challenging, impacting overall growth.
Looking ahead
While Natco Pharma has shown impressive growth and strong financial health, the high RSI of 71.44 indicates the stock may be overbought, suggesting a potential for a price correction.
Investors should keep an eye on the company’s next moves, especially its upcoming product launches and strategies to overcome challenges in the domestic and agrochemical segments.
Conclusion
Natco Pharma’s recent performance highlights its robust business model and strategic focus on high-growth areas.
For millennials and Gen Z investors, Natco Pharma’s stock represents a compelling mix of strong financials and potential future growth, making it an interesting addition to any investment portfolio.
As always, staying informed and considering both the opportunities and risks when investing in the stock market is wise.
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