Natco Pharma reports 38.3% revenue growth in FY2016 and 2.1 pp EBITDA Margin decline from 26.2% to 24.1%
26-05-2016 • About Natco Pharma (
$NATCOPHARM) • By InTwits
Natco Pharma reported FY2016 financial results today. Here are the key drivers of the company's long term financial model:
- Natco Pharma is a fast growth stock: FY2016 revenue growth was 38.3%, 5 year revenue CAGR was 20.0% at FY2016 ROIC 17.2%
- Natco Pharma has high CAPEX intensity: 5 year average CAPEX/Revenue was 16.6%. At the same time it's a lot of higher than industry average of 7.5%.
- CAPEX is quite volatile: ₹283m in FY2016, ₹180m in FY2015, ₹947m in FY2014, ₹171m in FY2013, ₹893m in FY2012
- The company has highly profitable business model: ROIC is 17.2%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.2x while industry average is -0.1x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 38.3%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.8 pp from 15.9% to 18.7% in FY2016. During the last 5 years EBITDA Margin topped in FY2015 at 26.2%.
Net Income margin decreased on 2.7 pp from 16.3% to 13.6% in FY2016.
Investments (CAPEX, working capital and M&A)
Natco Pharma's CAPEX/Revenue was 13.8% in FY2016. CAPEX/Revenue decreased on 2.5 pp from 16.3% in FY2013 to 13.8% in FY2016. It's average level of CAPEX/Revenue for the last three years was 14.1%. Natco Pharma invested a big chunk of EBITDA (57.2%) to CAPEX to secure its growth. CAPEX as a % of Revenue pursued a declining trend in the last 5 years.
Return on investment
The company operates at good ROIC (17.2%) and ROE (14.5%). ROIC increased slightly on 1.8 pp from 15.4% to 17.2% in FY2016. ROE decreased on 2.7 pp from 17.1% to 14.5% in FY2016. ROIC grew at 0.55 pp per annum in FY2012-FY2016.
Leverage (Debt)
Debt level is 0.2x Net Debt / EBITDA and 0.4x Debt / EBITDA. Net Debt / EBITDA dropped on 1.1x from 1.4x to 0.2x in FY2016. Debt dropped on 63.9% while cash surged on 254%. Net Debt/EBITDA stuck to a declining trend at -0.4x per annum in the last 5 years.
Natco Pharma has short term refinancing risk: cash is only 39.2% of short term debt.
Management team
The company's CEO Rajeev Nannapaneni has spent 8 years with the company.
Financial and operational results
Natco Pharma ($NATCOPHARM) key annual financial indicators| mln. INR | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 5,237 | 6,605 | 7,389 | 8,253 | 11,416 | 38.3% |
| EBITDA | 1,126 | 1,531 | 1,837 | 2,165 | 2,752 | 27.1% |
| Net Income | 596 | 719 | 1,027 | 1,346 | 1,552 | 15.3% |
Balance Sheet
|
|---|
| Cash | 346 | 100 | 102 | 124 | 441 | 254.2% |
| Short Term Debt | 1,245 | 1,999 | 1,450 | 2,148 | 1,125 | -47.6% |
| Long Term Debt | 1,341 | 1,378 | 955 | 970 | 0 | -100.0% |
Cash flow
|
|---|
| Capex | 1,280 | 1,078 | 1,060 | 1,167 | 1,574 | 34.8% |
Ratios
|
|---|
| Revenue growth | 13.9% | 26.1% | 11.9% | 11.7% | 38.3% | |
| EBITDA growth | 14.8% | 35.9% | 20.0% | 17.9% | 27.1% | |
|
|---|
| EBITDA Margin | 21.5% | 23.2% | 24.9% | 26.2% | 24.1% | -2.1% |
| Net Income Margin | 11.4% | 10.9% | 13.9% | 16.3% | 13.6% | -2.7% |
| CAPEX, % of revenue | 24.4% | 16.3% | 14.4% | 14.1% | 13.8% | -0.4% |
|
|---|
| ROIC | 14.4% | 15.5% | 15.7% | 15.4% | 17.2% | 1.8% |
| ROE | 14.4% | 14.3% | 16.3% | 17.1% | 14.5% | -2.7% |
| Net Debt/EBITDA | 2.0x | 2.1x | 1.3x | 1.4x | 0.2x | -1.1x |
Peers in Pharmaceuticals
Below we provide Natco Pharma benchmarking against other companies in Pharmaceuticals industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Mangalam Drugs & Organics ($MANGALAM) | - | -18.2% | -2.1% | 79.8% | 33.7% |
| Sun Pharmaceutical Industries ($SUNPHARMA) | 39.9% | 40.4% | 42.4% | 70.2% | - |
| Lyka Labs ($LYKALABS) | 41.9% | -25.7% | -22.6% | 68.7% | - |
| Marksans Pharma ($MARKSANS) | 16.7% | 23.3% | 43.3% | 26.8% | - |
| Torrent Cables ($TORRCABS) | 27.5% | 17.4% | -42.9% | 26.5% | - |
| |
|---|
| Median (41 companies) | 25.1% | 14.7% | 13.7% | 8.6% | 12.2% |
|---|
| Natco Pharma ($NATCOPHARM) | - | 26.1% | 11.9% | 11.7% | 38.3% |
Top companies by Gross margin, %
| Top | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Dr.Reddy'S Laboratories ($DRREDDY) | - | 52.1% | 57.4% | 57.6% | 59.6% |
| Omega Laboratories ($OMEGALAB) | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% |
| |
|---|
| Median (2 companies) | 46.9% | 26.1% | 28.7% | 28.8% | 29.8% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Divi'S Laboratories ($DIVISLAB) | 37.2% | 38.2% | 40.2% | 37.4% | - |
| Hester Biosciences ($HESTERBIO) | - | - | - | 32.9% | - |
| Sun Pharmaceutical Industries ($SUNPHARMA) | 40.8% | 44.3% | 44.9% | 29.2% | - |
| Dr.Reddy'S Laboratories ($DRREDDY) | 25.8% | 22.9% | 25.1% | 23.2% | 25.8% |
| Marksans Pharma ($MARKSANS) | -27.2% | 15.0% | 18.1% | 23.2% | - |
| |
|---|
| Median (53 companies) | 12.7% | 12.8% | 14.3% | 12.0% | 18.7% |
|---|
| Natco Pharma ($NATCOPHARM) | 21.5% | 23.2% | 24.9% | 26.2% | 24.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Claris Lifesciences ($CLARIS) | 58.1% | 42.9% | - | 103.1% | 15.8% |
| Wintac ($WINTAC) | - | - | - | 22.8% | - |
| Hester Biosciences ($HESTERBIO) | - | - | - | 21.5% | - |
| Ipca Laboratories ($IPCALAB) | 11.2% | 8.3% | 11.6% | 17.8% | - |
| Granules India ($GRANULES) | 8.8% | 15.2% | 24.3% | 11.4% | 9.4% |
| |
|---|
| Median (31 companies) | 7.7% | 7.5% | 5.7% | 6.0% | 8.0% |
|---|
| Natco Pharma ($NATCOPHARM) | 24.4% | 16.3% | 14.4% | 14.1% | 13.8% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Marksans Pharma ($MARKSANS) | -142.4% | 34.9% | 33.8% | 41.2% | - |
| Alembic Pharmaceuticals ($APLLTD) | 27.5% | 29.1% | 41.5% | 35.7% | 62.1% |
| Jenburkt Pharmaceuticals ($JENBURPH) | 34.1% | 29.0% | 32.4% | 35.3% | - |
| Abbott India ($ABBOTINDIA) | 29.6% | 26.9% | 30.5% | 34.2% | 34.1% |
| Divi'S Laboratories ($DIVISLAB) | 30.6% | 30.4% | 32.3% | 30.5% | - |
| |
|---|
| Median (63 companies) | 13.7% | 13.2% | 14.4% | 13.0% | 13.1% |
|---|
| Natco Pharma ($NATCOPHARM) | 14.4% | 15.5% | 15.7% | 15.4% | 17.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Jubilant Life Sciences Limited ($JUBILANT) | 4.0x | 3.5x | 3.5x | 6.4x | 3.2x |
| Shasun Pharmaceuticals ($SHASUNPHAR) | 2.8x | 4.5x | 6.0x | 6.2x | - |
| Claris Lifesciences ($CLARIS) | 1.9x | 1.1x | 1.8x | 3.2x | 2.9x |
| Dishman Pharmaceuticals & Chemicals ($DISHMAN) | 3.6x | 2.6x | 2.3x | 2.9x | 2.1x |
| Neuland Laboratories ($NEULANDLAB) | 4.2x | 3.5x | 2.6x | 2.6x | 2.0x |
| |
|---|
| Median (48 companies) | 1.4x | 1.2x | 0.3x | 0.0x | 0.7x |
|---|
| Natco Pharma ($NATCOPHARM) | 2.0x | 2.1x | 1.3x | 1.4x | 0.2x |
