Mehabe score: 2 G Factor: 1 Piotski Score: 4 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 1 and Piotski score of 4.
Description
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. #
NATCO has established its presence in all three business segments viz. finished dosage formulations (“FDF”), active pharmaceutical ingredients (“APIs”), Contract Manufacturing Business.
Main Points
Exports of formulations – Complex Generics (51% of sales)
Differentiated approach of manufacturing hard-to-make complex generic drugs including Para IV filings and FTF opportunities
US formulations have grown from 113 Cr in FY16 to 783 Cr in FY20 on the back of complex generic launches of drugs like copaxone, tamiflu, doxil and fosrenol.Site:NATCOPHARM
Market Cap:
Rs 20,618 cr
Price:
1131.0
Trading pe:
42.8x
Book-value:
223/share
Div yield:
0.60 %
Earning yield:
3.10%
Face-value:
2.00/share
52week high:
1188.95
52week low:
595.05
Technical Analysis
Stock trades at 1131.0, above its 50dma 989.69. It also trades above its 200dma 886.88. The stock remains bullish on techicals
The 52 week high is at 1188.95 and the 52week low is at 595.05
Price Chart
P/E Chart
Sales and Margin
Strengths
– is almost debt free.
– has been maintaining a healthy dividend payout of 22.07%
Weakness
–
Competition
– The industry trades at a mean P/E of 28.8x. Sun Pharma.Inds. trades at the industry’s max P/E of 55.24x. NATCOPHARM trades at a P/E of 42.8x
– Industry’s mean G-Factor is 2.0 while the mean Piotski score is 8.0. NATCOPHARM has a G-Factor of 1 and Piotski scoreof 4.
– Average 1 month return for industry is 8.1%. The max 1- month return was given by Piramal Enterp.: a return of 30.62 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 331.0 cr compared to Rs 455.0 cr for period ended Mar 2020, a fall of 27.3%
Operating Profits reported at Rs 76.0 cr for period ended Mar 2021 vis-vis 128.0 for period ended Mar 2020 .
Operating Margins contracted -517.1 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 2.91 compared to Rs 3.44 for previous quarter ended Dec 2020 and Rs 5.17 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 2052.0 cr for period ended Mar 2021 vis-vis sales of Rs 1915.0 cr for the period ended Mar 2020, a growth of 6.7%. The 3 year sales cagr stood at -2.1%.
Net Profit reported at Rs 441.0 cr for period ended Mar 2021 vis-vis sales of Rs 461.0 cr for the period ended Mar 2020, falling 4.5%.
Company reported a poor Net Profit CAGR of -14.1% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was 13.0% compared to 19.0% over the last 3 Years. – The stock has given a return of 84% on a 1 Year basis vis-vis a return of 11% over the last 3 Years. – The compounded sales growth on a TTM bassis is 14% vis-vis a compounded sales growth of -2% over the last 3 Years. – The compounded profit growth on a TTM basis is -1% vis-vis a compounded profit growth of -2% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 16.35% vis-vis 18.17% for Dec 2020 – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 18.65% vis-vis 17.88% for Dec 2020
Conclusion
– is almost debt free.
– has been maintaining a healthy dividend payout of 22.07% –
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 989.69 and is trading at 1131.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
