Why Natco Pharma Share Price is Rising

In the last year, many sectors which have been ignored for one or the other reason have been once again making a comeback.

One such sector is pharma.

Just before the entire market was dominated by the Public Sector Undertaking (PSU) rally, the Indian pharmaceutical companies emerged from years of underperformance.

Their comeback is evident as Nifty Pharma index hovered around its 52-week high at 19,045.7, rising 175 points or 0.9% in the afternoon trade on 19 February.

Amidst this comeback, Natco Pharma has particularly stood out, with its shares hitting a 52-week high and showing gains for the fifth consecutive session.

Here's why Natco Pharma's share price is rising.

#1 Robust Q3 Results

Natco Pharma's shares continued their upward momentum, reaching a new 52-week high following impressive quarterly financial results.

For the December 2023 quarter, the company recorded a consolidated revenue of Rs 7.6 billion (bn), a significant increase from Rs 4.9 bn in the corresponding period last year, driven by robust growth across its business segments.

Further, the company reported a three-fold surge in consolidated net profit, reaching Rs 2.1 bn in the third quarter, attributed to the strong revenue growth.

In the same period the previous year, the company had posted a consolidated net profit of Rs 623 million (m).

Total expenses rose to Rs 5.4 bn, up from Rs 4.4 bn in the same quarter last year.

The third quarter saw a notable increase in revenue from the export of formulations, reaching Rs 6.1 bn compared to Rs 3.3 bn in the year-ago period.

However, domestic formulations revenue declined to Rs 994 m, down from Rs 1 bn in the corresponding period last fiscal.

The Active Pharmaceutical Ingredients (API) vertical also reported a slight increase in revenue, reaching Rs 463 m, up from Rs 426 m in the same period a year ago.

Adding to positive sentiments, the company's board of directors at their meeting held on 14 February 2024, have approved a third interim dividend of Rs 1.25 per equity share of Rs 2 each for the financial year 2023-24.

#2 Profit Guidance Raised

Natco Pharma raised the guidance for profit after tax to over Rs 12 bn from Rs 10-12 bn earlier.

The upward revision in profit guidance indicates that the company's management is optimistic about future earnings. Investors generally respond positively to an optimistic outlook, leading to increased buying activity.

What Next?

The pharmaceutical company also announced the launches of three unique products in the coming 12-18 months.

It is planning to deliver five to six complex products, like peptides.

Natco Pharma feels confident about its growth in the US on promising pipelines, including FTF products, such as olaparib and semaglutide.

Further, the company plans to strengthen its presence in established markets.

Natco Pharma is currently the market leader in the domestic oncology market. It has a specialised field force of sales representatives and a strong distribution network.

Given its strong R&D capabilities and track record, Natco primarily focuses on complex products with high barriers to entry. That's what gives it an edge.

The industry is poised for sustained growth in 2024 and is expected to reach US$ 65 billion (bn) owing to multiple growth drivers, such as rising affordability, increasing access, low cost of production, and others, along with government support.

To promote the pharma sector, the Indian government has announced many policy initiatives in 2023, including the Promotion of Research and Innovation in the Pharma MedTech sector (PRIP), an approach paper on National Pharma Policy displayed thrust on 'One Health' during the G20 Summit.

How Shares of Natco Pharma have Performed Recently

The Natco Pharma stock rose around 22% in the past five days. Over a month, the share price has gained by 24%.

Natco Pharma share price touched its 52-week high price of Rs 1,080 on 20 February 2024. Its 52-week low was Rs 520.3 touched on 16 March 2023.

The company is currently trading at a PB (price to book value) multiple of 3.7 times.

About Natco Pharma

Established in 1981 and headquartered in Hyderabad, Natco Pharma is a vertically integrated R&D-driven pharma company. In India, it is the market leader in oncology and gastro hepatology.

In the US, Natco is focused on niche and difficult-to-make complex generics such as Tamiflu and Copaxone highlighting its R&D capabilities.

It partners with top generic companies such as Mylan and Teva in the US which de-risks its business and allows it to focus on its core R&D and manufacturing strengths while leaving litigation and marketing to its partners.

Natco markets its products in more than 40 countries and operates through its subsidiaries in Brazil, Canada, Singapore and Australia.

You can also compare Natco Pharma with its peers:

Natco Pharma vs Zydus Lifesciences

Natco Pharma vs Glenmark Pharma

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...