1. At a Glance
Natco Pharma isn’t a “make 500 drugs, hope something sticks” company. It’s a precision striker — targeting niche, complex generics and first-to-file opportunities. Market cap ₹15,899 Cr, CMP ₹888, and a deliciously lowP/E of 9.38. Q1 FY26 revenue was ₹1,390.6 Cr with PAT ₹480.3 Cr — margins fat enough to make competitors choke. Debt? Almost gone. ROCE? A sizzling 32.8%.
2. Introduction
Founded in 1981, Natco has built a business model around beingthe guy who walks in late to the party but leaves with the best dessert. They specialise in para-IV filings, high-barrier generics, oncology drugs, and niche APIs — letting Big Pharma spend billions developing products, then swooping in with cost-efficient versions when the patents expire (or when they win a legal battle).
This strategy has delivered33.4% PAT CAGRover the past five years. The stock, however, is sulking — down ~41% in the last year thanks to volatile US sales and quarterly hiccups.
3. Business Model (WTF Do They Even Do?)
- Finished Dosage Formulations (FDF)– Key market is the US with partners like Teva, Mylan, Sun, Alvogen; now expanding in MENA, LATAM, and SEA.
- Active Pharmaceutical Ingredients (APIs)– Backward integration to protect margins.
- Contract Manufacturing– High-value niche manufacturing for other pharma companies.
The beauty? Targeting low-competition, complex drugs — avoiding the race-to-zero pricing in commoditised generics.
4. Financials Overview
- TTM Revenue:₹4,396 Cr
- TTM EBITDA:₹1,962 Cr (EBITDA margin ~45%)
- TTM PAT:₹1,695 Cr (Net margin ~38.6%)
- Q1 FY26
- Revenue:₹1,390.6 Cr (+6% YoY)
- Q1 FY26 PAT:₹480.3 Cr (-28% YoY due to high base effect)
P/E Recalculation:Q1 EPS = ₹26.84 ⇒ Annualised EPS ≈ ₹107.4CMP ₹888 ⇒ Adjusted P/E ≈8.27— screaming undervaluation for a high-margin, debt-light pharma company.
5. Valuation (Fair Value Range)
| Method | Calculation | FV (₹) |
|---|---|---|
| P/E Method | EPS ₹100–107 × P/E 10–12 | 1,000–1,280 |
| EV/EBITDA | EBITDA ₹1,962 Cr × 9–10 EV/EBITDA – Net Debt ₹(Negative) | 980–1,100 |
| DCF (10% WACC, 4% growth) | Based on 5-year conservative projections | 950–1,150 |
Fair Value Range:₹950 – ₹1,150
This FV range is for educational purposes only and is not investment advice.
6. What’s Cooking – News, Triggers, Drama
- Interim Dividend– ₹2/share declared for FY26.
- US pipeline– New launches in oncology and niche therapies expected over the next 12–18 months.
- Geographic Diversification– Lower US dependence vs FY23 (US was 73% of sales, now ~44%).
- Authorized Capital Hike– Raised to ₹45 Cr, hinting at
