Natco Pharma Ltd shares continued their sharp fall in Friday’s trade after the company recorded a drop in its third-quarter results. The stock plunged 10.80 per cent to hit a 52-week low of Rs 868.25. At this price, it has tumbled 28.63 per cent in two trading days.
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The company reported a 38 per cent, year-on-year (YoY), decline in its December 2024 quarter (Q3 FY25) consolidated net profit. During the quarter under review, profit after tax (PAT) came at Rs 132.4 crore as against Rs 212.7 crore in the year-ago period. PAT margin was at 20.3 per cent compared to 26.7 per cent in Q3 FY24.
Revenue slipped 18.16 per cent to Rs 651.1 crore from Rs 795.6 crore in the corresponding period last fiscal. Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 29.49 per cent to Rs 215.1 crore YoY. EBITDA margin also fell to 33 per cent in Q3 FY25 from 38.3 per cent in Q3 FY24.
A few market experts largely suggested that investors with a long-term view should only consider holding on to the stock. One of them advised against fresh buying at the current market price.
“The stock has given 4x returns in the last 3 years. After such a spike whenever there is an earnings miss, it tends to witness a strong selling pressure. Long-term investors can consider holding on to it. Those looking to exit can do so in case of a pullback rally. The management commentary is yet to come. If the company can share an earnings outlook, we may witness a recovery. That said, fresh buying is not advised at current levels.
“For Natco Pharma, one should see the stock more from the long-term point of view. Investors need to have patience and guts of steel to hold on to this stock, especially in the kind of tumultuous markets that we have witnessed,” said Vinit Bolinjkar, Head of Research at Ventura Securities.
Technically, the stock traded lower than the 5-day, 10-, 20-, 30-, 50-, 100-, 150-day and 200-day simple moving averages (SMAs). Its 14-day relative strength index (RSI) was 23.59. A level below 30 is defined as oversold while a value above 70 is considered overbought.
The company’s scrip has a price-to-equity (P/E) ratio of 8.83 against a price-to-book (P/B) value of 2.29. Earnings per share (EPS) stood at 98.90 with a return on equity (RoE) of 25.89.
Natco Pharma’s business comprises research and development, manufacturing & selling bulk drugs and finished dosage formulations of FDFs and APIs. APIs business is strategic and serves captive requirements and third-party sales. It caters to both domestic and international markets including regulated markets like the United States of America and Europe. As of December 2024, promoters held a 49.62 per cent stake in the company.
