Natco Pharma

Hello All,

Is it good price to buy Natco pharma at current price for "very long" horizon (10 years)?
I have the same question for Jain Irrigation.

Thanks,
Ashutosh

 

Natco Pharma is excellent stock but it is at very high P/E of 65x and risk of margin of safety is not there in the stock. So if stock does not have good performance there is big risk. Also upside is reflected already there in the price.

Jain Irrigation is turnaround stock with good potential but problem is it is dealing with monsoon and farmers. If monsoon is not upto mark stock can go for toss. I think some allocation can be there in portfolio for Jain Irrigation because of turnaround potential IMHO.

 

Thanks for the response.
I agree with your analysis. I have been long waiting (more than a year) for correction in Natco Pharma. The PE is not coming down. The lowest PE in last 1 year was 45. Not sure when to invest in Natco.

 

Natco may seem expensive but if you factor in the earnings of FY 17 and FY 18, it is not at all expensive. Meaningful launches in US have been lined-up over the next couple of years. In FY 17 you will see launch of Gx Tamilfu which will add Rs 300 - 360 Cr to top-line. Though this is a one time event, it will add significantly to earnings this year. Much awaited launch of Gx Copaxone 20mg is expected anytime now. There are multiple triggers lined-up for this company. I expect this stock to be re-rated multiple times in next 2 years as various triggers unfold. Natco Pharma is top pick in pharma sector from multiple brokerage houses. Jefferis, Kotak, Edelweiss, ICICI Sec, Nirmal Bang, Anand Rathi, IDFC Sec, Haitong - have coverage on the stock with BUY rating.