Natco Pharma Q2 FY26 – ₹518 Cr Profit, ₹1,363 Cr Sales & 7 FDA Love Letters Later: The API Avengers Return

1. At a Glance

Natco Pharma is that one Hyderabad overachiever who juggles R&D, FDA inspections, and court battles like a Tollywood hero dodging bullets in slow-motion. The stock closed at₹865(down – 0.52%) with amarket cap of ₹15,489 Cr,P/E 10.1, andROE 28%– numbers any pharma analyst would swipe right on.

Yet, behind the scientific glamour sits a quarterly reality check:Sales ₹1,363 Cr,PAT ₹518 Cr,down 23.5 % QoQ, because apparently, even blockbuster generics have intermissions. Operating margins still command a royal ~42 %, proving Natco’s cost discipline is tighter than an FDA Form 483 checklist.

The company’sexport formulationsnow make up44 %of the pie (vs 73 % FY23),domestic formulations 15 %, andcontract manufacturing 29 %– clearly, Natco is spreading its chemistry like ghee on a paratha.

And just as analysts were sipping coffee, the US FDA giftedseven Form-483 observations(Nov 2025, Manali API unit). Because in pharma, “love letters” from regulators are part of the romance.

2. Introduction

Once upon a time, Natco was a modest API shop. Today, it’s an international pharma drama: court battles, patent settlements, and now aUS $226 Mn South African fling (Adcock Ingram acquisition). Think of it as theRRRof Indian pharma – R&D, Regulations, and Revenue diversification.

From oncology to agrochemicals, Natco sells everything from anti-cancer tablets to pest repellents – essentially fighting diseases in both humans and tomatoes. The domestic oncology brand is so entrenched that oncologists prescribe it faster than the stock price corrects post-results.

While the market keeps asking, “Why the drop from ₹1,500 to ₹865?”, management answers with new filings, niche launches, and dividend cheques. FY25 deliveredrecord ₹4,784 Cr revenueand₹1,883 Cr profit, only for FY26 guidance to promise – 30 % profit. A little melodrama keeps investors awake.

Yet, when yourROCE 33 %anddebt : equity 0.03, you can afford a few Bollywood plot twists.

3. Business Model – WTF Do They Even Do?

Natco is the three-in-one shampoo of pharma –Formulations + APIs + Contract Manufacturing, now with a dash of Agro Science.

• Export Formulations (44 %): their bread, butter, and occasionally champagne. Partnering with giants likeTeva, Mylan, Lupin, they play the “first-to-file Para IV” game – the legal version of musical chairs.
• Domestic Formulations (15 %): oncology and specialty pharma. A 850-person sales army ensures doctors remember “Natco” even in their dreams.
• APIs (10 %): the behind-the-scenes backbone – 50 + molecules, mostly oncology.
• Crop Sciences (2 %): an ambitious bet on pesticides; target ₹130-140 Cr revenue FY26.
• Contract Manufacturing (29 %): 40 + products for major Indian names – Natco’s profitable freelancing gig.

Eight plants, two R&D centres, and 570 patents later, Natco looks less like a pharma company and more like a scientific version of Dmart – quietly efficient, occasionally scandalous.

4. Financials Overview

Annualised EPS ≈ ₹ 115.6 → P/E ≈ 7.5×

Margins dipped but stayed elite; the drop in US sales hurt YoY, yet Natco still prints profits fatter than most mid-caps’ revenues. When OPM > 40 %, you’re not a company – you’re a printing press with FDA audits.

5. Valuation Discussion – Fair