Focus on oncology, new entrant in CnD division in domestic formulations. In domestic formulations, Natco is focusing on oncology and entered CnD (cardiology, diabetology) in early 2017, where its focus is on niche molecules with high entry barriers. It enjoys a strong brand in oncology (six brands with more than `100m revenue) and Hepatitis C. Within oncology, it offers a range of brands catering to various oncological diseases, of the breast, brain, bone, lung and ovaries. In CnD, the launches could be either at-risk, settlement with innovators for launches prior to Day-1 or complex limited-competition ones (Argatroban). Overall, we expect a ~16% CAGR in revenue over FY18-21, with a targeted launch of 8-10 products a year.
We retain our Buy recommendation and roll forward our price target to FY21 at a revised target of `930 (earlier `937), based on a sum-of-parts method. We value the base business at `757, based on 20x FY21e earnings, and the Para-IV opportunity at `173.
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