Broker's call: Natco Pharma (Sell)

CMP: ₹562.65

Target: ₹534

Nacto Pharma is an R&D focussed, vertically integrated pharmaceutical company with an experienced management team and presence across multiple speciality therapeutic segments.

Key takeaways: a) Total revenues declined by 11.6 per cent with sales of formulations degrowing by 19.7 per cent on a y-o-y basis.

 b) Net profit was down 34.5 per cent y-o-y as other expenses included a one-time provision of ₹15 crore for bad debts.

 c) The launch of Revlimid will be dependent on the court trial that will take place in Canada during the month of March

 d) Key drivers of revenue in FY20E-FY22E will be India, Brazil and Canada.

 We revise downward our revenue estimates by 15 per cent/18 per cent for FY20/21E while the PAT estimate by 18 per cent in both FY20 and FY21 to factor ongoing downtrend in earnings.

 We value at 15x on FY22E EPS and retain the Sell rating with a revised target price of ₹534.