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Monday, 6 November 2017


NATCO PHARMA LTD posted strong yearly numbers for the second quarter FY18. Profit After Tax & EBDITA rose in double digits even with Revenue skidding 9% YOY. Revenue was reported at Rs. 4267 Mn in the current quarter against Rs. 4679 Mn corresponding period previous year with sequential de-growth of 4%. Though sequential growth has been in the negative both for PAT & EBDITA by 10% & 9% respectively, the company has geared itself by controlling operating expenditure & taxation, improving other income & curtailing interest costs. On yearly basis, PAT continued with its growth march moving 27% higher compared to corresponding September quarter previous year. PAT stood at Rs.844 Mn against Rs 662 Mn in Q2 FY17. EBDITA was strong & stable with 18% growth and was reported at Rs. 1274 Mn against Rs. 1080 Mn corresponding quarter previous year. Profit Before Tax jumped 20% yearly and taxation declined 3% YOY buffeting quarterly bottom-line. Profit Before Tax grew to Rs. 1072 Mn in the current quarter from Rs. 897 Mn in Q2 FY17. Other Income soared 72% YOY and was reported at Rs. 55 Mn compared to Rs. 32 Mn same period previous year. Sequential growth was also high at 62% in the current September quarter FY18.

Formulations business contributing 85% of total revenues de-grew by about 4% at Rs. 3403 Mn in the current quarter as exports, Oncology revenues & 3rd party miscellaneous income declined by 50%, 16% & 21%YOY respectively. API revenues were impacted by domestic income which fell 19% whereas exports jumped 41% YOY. NATCO Pharma has maintained its growth momentum by controlling its operating expenditure which has declined 16% YOY. Operating expenditure stood at Rs.3048 Mn in Q2 FY18 vis-à-vis Rs. 3631 Mn in Q2 FY17.  Interest or finance expenditure also declined 70% YOY supporting the quarterly profitability. As a result both EBDITA & Net Profit Margins jumped phenomenally YOY. EBDITA & Net Profit Margins stood at 29.86% & 19.78% improving by 678 & 563 basis points YOY respectively in the current quarter. Natco Pharma is expected to bounce back on revenue front and improve its profitability and growth prospects further in the coming quarters. We recommend BUY for the stock for medium & long term with a target price of Rs. 1165.

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