We estimate these opportunities can translate to Rs2000mn to Rs4000mn in sales for NPL over the next 3 years. In Brazil too, NPL is anticipating new approvals in the coming months which should allow it to double current run rate from Rs300mn per quarter. We have retained Buy rating on the stock with a target price (TP) of Rs654, up 19% from the CMP.
With niche product launches, Natco’s India, Brazil and Canada businesses would do well, we believe. However, its revenue, EBITDA and PAT are likely to be flat over FY19-21 due to the high base for gTamiflu, though to some extent likely to be counter-balanced by gCopaxone. Beyond FY21, however, we expect a few niche launches to drive earnings. We retain a Buy on the stock, with a target of Rs 763.
At current CMP of Rs516, NATCO is trading at a P/E of 13x on FY21E EPS. We believe that increasing copaxone market share and better results from EM’s will sustain the earnings growth going forward. We project domestic/ export formulations to grow at ~7/6% CAGR over FY19-21E and expect margins to stabilize around 39% in FY21E. However, considering no major launches in FY20, we value at 12x on FY21E EPS and downgrade the rating to sell from hold with a revised target price of Rs487.
The bright spot for Natco is of course its strong balance sheet besides the management’s abilityto carve out niche out of the available opportunities. The growth trajectory is likely to improve from FY22 onwards as the new strategy settles down. We value the stock on an SOTP basis. Accordingly, we arrive at our new target price of | 595, which includes base business value of ~| 400 (15x FY21E EPS of | 26.7) + | 195 for NPV of FTF/Para IVs in the US.
Based on the revised forecasts, we have cut our target price on NPL to Rs654 (from Rs779 earlier) and retained Buy rating on the stock. NPL has given guidance of high single-digit growth in net earnings for FY20, which is expected to be largely driven by rest of world markets (Canada and Brazil) and India. These markets put together should post high-teen growth. As regards limited competition portfolio in the US, the company does not assume incremental competition in Copaxone generic, at least until the end of CY20.