Natco Pharma Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Natco Pharma Ltd (NATCOPHARM) Q3 FY24 Earnings Concall

• Financial Performance
  • Recorded total revenue of INR795.6 crores in Q3 FY’24, a 55% growth over INR513.3 crores in same period last year.
  • Revenue crossed INR3,000 crores year-to-date with one more quarter to go, a major milestone for the company.
  • Net profit grew over 3.5 times to INR212.7 crores in Q3 FY’24 from INR62.3 crores in same period last year.
  • Profit crossed INR1,000 crores YTD with one more quarter to go, a major milestone for the company.
• Segment Performance
  • Formulations exports including profit share and foreign subs delivered strong growth at INR605.6 crores.
  • Domestic formulations also grew to INR99.4 crores.
  • Crop health Sciences recorded revenue of INR14.1 crores.
• Guidance Update
  • PAT guidance increased from INR1,000-1,200 crores to exceeding INR1,200 crores for FY24.
  • Sales guidance almost INR4,000 crores for FY24.
  • Subsidiaries performed well with INR163 crores revenue.
  • Expect tax rate to remain around 16-17% in coming years.
  • INR282 crores spent in 9M FY24, not expecting large capex going forward.
  • Current investments for launches 5-7 years away.
  • Facilities running optimally but pharma investments have long gestation periods
• Acquisition Update
  • Looking for large acquisition in emerging markets instead of smaller ones.
  • Strong balance sheet with net cash position of INR1,800 crores to support deals.
  • No deal finalized yet but expectation to close something in next 12 months.
  • Looking for 20%+ return on capital employed.
• US Business Performance
  • Copaxone, lanthanum, lapatinib and other portfolio doing reasonably well.
  • Strategy to focus on complex and first-to-file opportunities.
  • Strong pipeline with semaglutide, olaparib filings done.
  • Goal to file 2-3 more high-value products in next 12 months.
• Domestic Business growth
  • Growth lagging at 8-10%, driven primarily by oncology which is 65% of portfolio.
  • Evaluated acquisitions but found valuations too expensive.
  • Have some interesting launches planned but not in near term.
  • Need to acquire assets to expand coverage beyond niches.
• Revlimid Outlook
  • Good performance in Q3 despite lower quota due to growth in other products.
  • New allocation starts from March 2024, expects higher contribution in FY25.
  • Spreading quota through year.
  • First quota for March launched, expectation to do well.
• ROW Subsidiaries
  • Canada, Brazil performing very well.
  • Filing 7-8 products in each subsidiary.
  • Starting operations in Colombia, Indonesia.
  • Looking to acquire assets to grow ROW business further.
• Supply Chain Impact
  • 50-60% increase in freight rates due to Red Sea crisis.
  • Seeing some delays but managing supply of key products.
  • Raw material prices from China stable for now.
  • Higher logistics costs impacting expenses.
• Agrochem Outlook
  • Revenue may end at INR150-160 crores this year, lower than expected.
  • But good for a new entrant, has potential to scale to INR300-400 crores.
  • Key is launching first generics and establishing brand with farmers.
  • Exports to contribute later, focus on building India branded business.
• Strategic Investments
  • Take minority stakes in startups for capability development.
  • Invested in CAR-T company to get access to new technology not available internally.
  • Singapore entity for potential manufacturing or portfolio advantage.
  • Antidilution clause increased stake to 7% though initial investment small.