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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.
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