Revenue and Profit Crumble
Natco Pharma’s stock nosedived 20% on February 13 after delivering a disappointing Q3 earnings report. The company suffered an 18.16% revenue drop, falling to Rs 651.1 crore from Rs 795.6 crore a year ago. Profitability also collapsed, with earnings before interest, tax, depreciation, and amortization (EBITDA) plunging by 29.49% to Rs 215.1 crore. The EBITDA margin shrank to 33%, a significant decline from 38.3% in the same quarter last year.
Stock Performance and Investor Panic
Investors reacted sharply to the lackluster performance. Natco Pharma’s share price tanked 19.86% to Rs 975 during heavy trading. Over 2.15 lakh shares exchanged hands, far exceeding the two-week average of 28,000 shares. The stock’s turnover reached Rs 21.66 crore, eroding the company’s market capitalization to Rs 17,542.02 crore.
Technical indicators signaled further trouble. The stock traded below all major moving averages, highlighting its persistent weakness. The 14-day relative strength index (RSI) hit 28.59, signaling extreme bearish sentiment.
Lackluster Financials and Hollow Dividend Announcement
In an apparent attempt to pacify shareholders, the company declared an interim dividend of Rs 1.50 per equity share of Rs 2 each for FY25. The record date for shareholders eligible for the dividend is February 18, with payments starting on February 28.
However, financial indicators paint a bleak picture. The company’s price-to-equity (P/E) ratio stood at 10.10, and its price-to-book (P/B) value was 2.61. Earnings per share (EPS) were Rs 98.90, while return on equity (RoE) stood at 25.89%—metrics that fail to justify the disastrous stock performance.
Management’s Failure and Business Decline
Industry experts blame Natco Pharma’s decline on weak export formulation sales and poor strategic decisions. The loss of exclusivity on Revlimid, a major revenue generator, has exposed the company’s over-reliance on a single product. Domestic sales also deteriorated, signaling broader operational inefficiencies.
“Natco Pharma is struggling due to its failure to diversify revenue streams and manage competition effectively. The company’s reliance on a few key drugs has proven disastrous,” said Prathamesh Masdekar, Research Analyst at StoxBox.
What Should Investors Do?
With no immediate turnaround in sight, investors should approach Natco Pharma with extreme caution. While management touts future product launches, there are no guarantees that these will offset the current crisis. The stock remains under severe pressure, and further declines are possible if leadership fails to execute a clear recovery plan.
Short-term traders should avoid catching a falling knife, while long-term investors should demand stronger accountability before considering any positions. For now, Natco Pharma remains a sinking ship in turbulent waters.
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