Natco Pharma’s crop care solutions likely to support earnings growth

Analysts maintain a positive outlook for its pharmaceuticals business and expect the crop care solutions to aid growth.

The chlorantraniliprole or CTPR associated products, used across a wide range of crops for pest management, are expected to drive earnings in the near-term, said analysts at Geojit Financial services.

In the pharmaceuticals vertical, the company is seeing traction in both domestic and export formulations business. The US business already has seen strong contributions from generics of Revlimid, the multiple myeloma treatment drug during first half and the momentum is likely to continue in second half. The domestic pharmaceutical business that saw some rebound in September quarter too is likely to do well.

The company derives almost half of its revenues from export formulations that has strong presence in regulated markets like the US. Its focus remains on high-barrier-to-entry product that see limited competition. The company also had acquired DASH Pharmaceuticals LLC to build its presence in the US and the same is expected to drive benefits.

The first half had seen export formulation business register more than 200% growth and its subsidiaries in Brazil and Canada, backed by strong new launches, also reported robust growth with 40-50% share in profitability, as per analysts.

“We remain optimistic on Natco’s future profitability backed by the traction in CTPR and Revlimid sales and recovery in domestic formulation,” said analysts at Geojit Financial Services.

The domestic business is showing some spark as was visible in sequential growth of 6% seen during Q2 even though high base of last year due to Covid meant that on year-on-year basis it saw a decline.

Analysts say that the oncology segment is now stable and company is gaining traction in cardio-diabeto segment. The 8- 10 new launches in the segments, expected during the year, can further help drive domestic and the company is also looking and exploring suitable organic opportunities.

Analysts at Dolat Capital Markets Pvt Ltd said that they expect Natco’s domestic business revenue to gradually recover from FY24. The company in its Q2 investor presentation had said that three key business segments for it are oncology, pharma specialty and cardiology & diabetology. Its focus lies on niche molecules with high barriers to entry and majority of launches in India are first-time generics