Natco Pharma share price hits 52-week high after 90% rally year to date. Buy, Sell or Hold?

Stock Market Today: Natco Pharma share price gained more than 7% in the intraday trades to scale 52-week highs on Thursday, The Natco Pharma share price is up more than 90% year to date, having given handsome returns to the investors.

It is the strong performance in the US markets that is driving the gains for Natco Pharma share price.

Exports drive Q1 performance

Natco Pharma reported total consolidated revenues at ₹1411 crore grew 21.5% year on year. The Pharma export formulations stood contributed ₹1210 Crore while domestic Formulations revenue stood at ₹102 Crore.

The earnings before interest, Tax Depreciation and Amortisation (Ebitda) at ₹805 crore as per analyst calculations grew 51% year on year and 62% sequentially. Helped by strong improvement in operating performance profit after tax for Q1FY25 was at ₹668.5 crore thereby grew 73% year on year and 59% sequentially.

Analysts at Nuvama Institutional Equities said that Q1FY25 revenue and net profit beat consensus estimate by 3% and 24% restively mainly on higher generic Revlimid (multiple myeloma drug) sales.

Strong US pipeline to support earnings

The business model of Natco Pharma is such that it targets launching generics of large and niche limited competition products in the US. that are going to turn off patent. Natco generally does so by partnering with other large Pharma companies.

While Revlimid is one such product where Teva is its front-end partner, generics of this product, not only have driven Q1 growth, the sales in subsequent quarters is also likely to remain strong. As per JM Financial Institutional Securities data , Natco’s exports in July grew to $5 million (versus $2 Million YoY).

The product pipeline for Natco remains strong with around 28 para-IV drugs already filed and there are at least 8 key Sole first to file (Para IV) in the pipeline, which company can launch on exclusivity depending on approvals by the US drug regular.

Analysts Views

While limited competition niche products launch is driving growth and is likely to continue, which will be supported by more launches in the longer run as product pipeline also remains strong. However some analysts remain cautious too. While Natco's product pipeline is strong but execution is what they remain watchful for.

The generic Revlimid opportunity as per Nuvama is likely to taper off from January-2026, which could lead to a sharp fall in earnings in FY27, hence making it imperative for new products to start contributing even though as per Nuvama Natco’s selective approach has resulted in a robust US pipeline. They say that while the long-term business outlook remains intact, but anticipate a sharp fall in earnings in FY27 as generic Revlimid tapers off, and have HOLD rating on the stock

ICICI Securities too has said that while a high base of last year dented YoY growth (around 23%). Crop science growth continued to be marred by stock returns. NatCo management guides for profit growth of 20% for FY25 driven by better market share in generic Revlimid (to touch 33% in H2FY26), highlighted ICICI Securities.

Natco is a Cash rich company having a net cash balance of ₹2000 Crore – earmarked for R&D (8–10% of sales), acquisition in Rest of World markets and dividends. ICICI Securities has raised FY25–26 estimates for earnings by 13–28% to factor in better traction in exports but also have a Hold rating on the stock but with a higher SoTP-based target price of ₹1,430 from ₹1145 earlier.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions