NATCO Pharma shares tank 10% to 52-week low, extend fall to 6th straight session. Do you own?

Shares of NATCO Pharma tumbled another 10% in intra-day trade on Friday, February 14, extending its slide to the sixth straight session. The stock had tumbled 20% on Thursday as well following the announcement of its results for the third quarter of fiscal 2024-25 (Q3 FY25), wherein it posted a decline in revenue, profit and operating income.

The pharma company, post-market hours on Wednesday, reported that its net profit for the quarter under review came in at ₹132.4 crore, down 37.75% year-on-year (YoY) compared with ₹212.7 crore in the previous quarter of last year.

NATCO Pharma's consolidated revenue from operations declined by 37.4% to ₹474.8 crore in Q3 FY25 from ₹758.6 crore in the year-ago period.

Meanwhile, its earnings before interest, tax, depreciation and amortisation (EBITDA) witnessed a sharp 85.5% YoY drop to ₹38.8 crore in the quarter ended December 2024 from ₹268.1 crore in the corresponding quarter last year.

As a result, the company’s EBITDA margin dropped significantly to 33%, down from 38.3% year-over-year. On a sequential basis, the decline was even more pronounced, with EBITDA margins standing at 60.5% in the previous quarter of FY25.

A key factor behind the earnings slump remains the decline in export formulation business which is the biggest revenue contributor for the firm. In Q3 FY25, export formulation revenue nearly halved to ₹285.8 crore from ₹605.6 crore in Q3 FY24. The domestic formulation revenue was largely stable at ₹961 crore as against ₹994 crore on a YoY basis.

Analyst View

Natco’s Q3FY25 result was dragged by tepid performance in exports, which declined 52.8% YoY as it did not record sales of gRevlimid in the quarter, said brokerage ICICI Securities. 

Natco is on track to launch Semaglutide across India, Brazil, and Canada, post patent expiry in Mar’26, while the US opportunity (sole FTF for a couple of strengths/indications) shall open later in 2031. The crop science business is expected to draw sales of INR 1.2bn–1.5bn and is also likely to see EBITDA break-even in FY26. 

“We expect the base business’s margins to be higher than Q3FY25, as Natco is currently incurring losses in Agrochem and spending more on R&D (7–8% of sales), which may be curbed in the next few quarters,” the brokerage said.

It cut FY26E EPS by ~1% to factor in lower margins in the base business. ICICI Securities upgraded the stock to ADD with a lower target price of ₹1,100.

Earnings Impact

Following the earnings announcement, NATCO Pharma share price slumped 9.9% to ₹876.15 per share, also its 52-week low, on the BSE. In the six days of decline, NATCO Pharma share price has lost 34%.

Dividend Details

NATCO Pharma board also announced an interim dividend for FY25 of ₹1.50 per equity share of ₹2 each.

“The date for taking on record of its shareholders eligible for the purpose of payment of third interim dividend, i.e., the record date, is fixed as Tuesday, 18th February 2025. The payment of the said interim dividend will start from 28th February 2025,” NATCO Pharma said in a filing.

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