Natco Pharma stock up 18% today, 26% in 4-day rally. Nuvama shares target price

Shares of Natco Pharma Ltd climbed 18 per cent in Friday's trade to take its four-day rally to 26 per cent. The recent rally on the drug maker was seen as consolidated profit rose multifolds to Rs 212.70 crore in the December quarter compared with Rs 62.30 crore in the same quarter last year. Total revenue jumped Rs 795.60 crore from Rs 513.30 crore YoY. Ebitda margin for the quarter expanded to 38.4 per cent from 24.7 per cent YoY.

Nuvama Institutional Equities said Natco Pharma's Q3 beat consensus estimates on revenue and Ebitda fronts by 33 per cent and 84 per cent, respectively, led by higher gRevlimid share while RoW also picked up.

The Natco Pharma stock rose 18.18 per cent to hit a high of Rs 1,048.15 on BSE.

"Natco’s focus on complex opportunities has unleashed a massive gRevlimid opportunity and robust US pipeline—olaparib, erdafitinib, semaglutide, etc. RoW markets too picked up with subsidiaries contributing to growth. A strong BS provides scope to pursue inorganic opportunities across markets, besides investing in innovation such as CAR-T. We note a softer India and Agrochem in Q3FY24, but expect a pickup next year," Nuvama said.

The domestic brokerage has raised its FY24E and FY25 EPS estimates for Natco Pharma by 21 per cent and 12 per cent, respectively, to factor in the beat, higher gRevlimid and lower tax.

Nuvama said Natco’s gRevlimid opportunity is playing out better than expected, evident from the massive beat in Q3 that is likely to continue till Jan-26 as it is gearing up to supply higher volumes.

"Looking beyond FY25, a robust US pipeline consists of several FTF products such as olaparib, semaglutide (sole FTF in 8mg; partnered Viatris) and erdafitinib (own filing). Besides opportunities such as gLonsurf, Yondelis, Calquence and gKyprolis, among others should pay off in the future. In addition, other growth engines such as RoW markets and subsidiaries have started contributing to growth," Nuvama said.

Nuvama said there is a possibility of adverse action on the Kothur plant and the risk of pipeline monetisation but it anticipates limited impact on our estimates. Pursuing complex opportunities for long-term growth

"With gRevlimid picking up and Natco pursuing complex opportunities such as CAR-T in India, semaglutide, Olaparib, etc with gRevlimid cash, the long-term outlook is improving. We value Natco using an SoTP, ascribing 25x to base business’s Q3FY26E EPS, yielding Rs 483/share. gRevlimid value is INR380/share (from INR348) and other P-4 opportunities at Rs 194 (from INR187) as we roll over the valuation to Dec-25E. Maintain ‘BUY/SO’ with a target of Rs 1,055 (earlier Rs 980)," it said.

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