NATCO Pharma Limited

Healthcare — Drug Manufacturers - Specialty & Generic · NSE

₹785.85+₹0.90 (+0.11%)

DalalBaazaar Score

70 / 100

🟢 Good

Verdict

NEUTRAL

Risk

High

Driven by high debt relative to equity, small-cap size, which brings sharper price swings, falling profits.

In simple words: Strong business and financial position, but sales are shrinking. Debt is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 7:01 pm

Understanding the Business

Company site ↗

The 60-second version of NATCO Pharma Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

NATCO Pharma Limited, a pharmaceutical company, engages in the research and development, manufacturing, and marketing of finished dosage formulations, active pharmaceutical ingredients (APIs), and intermediates in India, the United States, and internationally.

IndustryDrug Manufacturers - Specialty & Generic

SectorHealthcare

Employees4,433

Annual revenue₹4,045 Cr

How does it make money?

Turns over ₹4,045 Cr a year. Of every ₹100 of sales, about ₹35 reaches shareholders as profit, with ₹43 left at the operating level before interest, tax and depreciation. Each of its 4,433 employees supports ₹91.2 lakh of revenue a year, the signature of a people-led business.

Revenue / employee₹91.2 lakh

Who are its competitors?

The closest listed comparisons in its industry are SUN PHARMACEUTICAL IND L, DR. REDDY S LABORATORIES, CIPLA LTD, DIVI S LABORATORIES LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

Compared side by side in Peers ↓

What is its competitive advantage?Some evidence

ROCE of 16.1% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

Peer median ROE14.5%

What is the outlook?

9 analysts covering the stock expect revenue to grow about 11.0% and earnings to grow about 12.1% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+11.0%

Est. earnings growth+12.1%

Analysts9

What has been driving growth?

Growth has come mainly from selling more, rather than from keeping more of each sale. Over 3 years revenue moved +50% while net margin moved +32% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+50%

Margin effect+32%

DalalBaazaar Score

70/ 100

Good

Weighted across six categories. Every point is explained below.

✓ Beta of 0.15 — historically steadier than the index
✗ Small Cap: thinner liquidity and sharper drawdowns are normal
✗ High leverage magnifies any downturn in earnings

Quality vs. Valuation

Company Quality

73/ 100

Good

How good the business is, ignoring the share price entirely.

Valuation

75/ 100

Cheap

What you are being asked to pay, ignoring how good the business is.

A good business currently available at an undemanding price — the combination this framework is built to look for.

Historical Valuation

Current P/E

12.4x

3Y Median

12.0x

40 monthly readings · mean 15.4x · range 7.6x–34.7x

Sector Median

33.3x

median of 4 sector peers

🟡Currently trading close to its 3y median of 12.0x — the market is paying about what it usually pays for this company.

🟢Against its sector it trades 63% below the peer median of 33.3x.

vs. its own history

Fair

12.0x median over 40 months · +4%

vs. sector peers

Cheap

33.3x median of 4 peers · -63%

vs. generic bands

Cheap

Below 15x

EV/EBITDA

8.6x

PEG

0.48

What's Good / What's Bad

🟢 What's Going Well3

Margins are improving
EBITDA margin is up from 38.4% to 43.3% over 3 years.
Cash generation is improving
Free cash flow is up 114% over 3 years.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

Nothing stands out as clearly deteriorating on the years of data available.

Red Flags

2 items require attention · 2 high

🔴Debt has risen sharplyFinancial
Total debt is up 305% over 3 years, from ₹176 Cr to ₹714 Cr.
🔴High leverageFinancial
Debt/Equity of 7.74x — earnings must service borrowings before shareholders see anything.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 38.4% to 43.3%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Cheaper than its peers
It trades 63% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Leverage amplifies any setback
Debt/Equity of 7.74x. Interest is payable whether or not the business has a good year.
Size brings its own risk
Small Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.
Several serious flags at once
2 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 11% a year✓ 14.5% CAGR
Latest reported year was -44.7%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 41%✓ 43.3%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✓ ₹1,377 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 0.4x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 13%✓ 16.1%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

8 / 12 checks passed

✓ Strong return on equity (ROE ≥ 15%)
✓ Strong return on capital employed (ROCE ≥ 15%)
✓ Healthy net margin (≥ 10%)
✓ Generates positive free cash flow
✗ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✗ Revenue growing year-over-year
✗ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Analyst consensus isn't majority-sell
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

5 good · 3 neutral · 3 weak

Market Cap

₹14,460 Cr

Small Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

12.4x

Cheap

Cheap against the generic band

P/B Ratio

1.53x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹63.37

Profitable

Profitable on a per-share basis

ROE

15.4%

Strong

Strong capital efficiency

ROCE

16.1%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

7.74x

High

High leverage

Revenue Growth (YoY)

-44.7%

Shrinking

Sales are contracting

Profit Growth (YoY)

-57.0%

Falling

Profits are shrinking

Dividend Yield

0.76%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

₹1,377 Cr

Cash generative

Generates cash even after funding its capex

More Metrics

P/E (Forward)

16.6x

Flat

At or above the trailing multiple — no earnings uplift is being priced in

Operating Margin

19.0%

Good

Healthy core-business profitability

Net Margin

32.8%

Good

Strong bottom-line conversion

Current Ratio

3.01

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.15

Defensive

Steadier than the market

52W Range Position

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

810.6 / 843.3

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

28.3

Oversold zone

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹2,697 Cr	₹3,979 Cr	₹4,412 Cr	₹4,045 Cr	+14.5%
EBITDA	₹1,036 Cr	₹1,880 Cr	₹2,458 Cr	₹1,749 Cr	+19.1%
EBITDA Margin	38.4%	47.2%	55.7%	43.3%	—
PAT (Net Profit)	₹715 Cr	₹1,388 Cr	₹1,885 Cr	₹1,419 Cr	+25.6%
EPS	₹39.18	₹77.34	₹105.26	₹79.2	+26.4%
ROE	14.7%	23.7%	24.8%	15.4%	—
ROCE	17.5%	28.4%	30.0%	16.1%	—
Total Debt	₹176 Cr	₹371 Cr	₹279 Cr	₹714 Cr	+59.5%
Free Cash Flow	₹644 Cr	₹853 Cr	₹1,185 Cr	₹1,377 Cr	+28.9%

🟢 Revenue has grown at 14.5% a year over 3 years.

🟢 EBITDA has grown at 19.1% a year over 3 years.

🟢 EBITDA Margin has risen from 38.4% to 43.3% over 3 years (+4.9 pts).

🟢 PAT (Net Profit) has grown at 25.6% a year over 3 years.

🟢 EPS has grown at 26.4% a year over 3 years.

🟡 ROE has held roughly flat at 15.4% over 3 years.

🔴 ROCE has fallen from 17.5% to 16.1% over 3 years (-1.4 pts).

🔴 Total Debt has grown at 59.5% a year over 3 years.

🟢 Free Cash Flow has grown at 28.9% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹11,074 Cr

Total Liabilities

₹1,853 Cr

Cash & Equivalents

₹199 Cr

Operating Cash Flow

₹1,768 Cr

Capex

-₹391 Cr

Shareholding (proxy)

Institutional Holding

13.3%

Insider Holding

50.9%

Corporate Actions

Next Earnings

12 Nov 2026

Dividend Rate

₹5.95

Ex-Dividend Date

20 Aug 2026

Analyst Consensus

Recommendations

5 Buy · 3 Hold · 3 Sell

Target Price (Mean)

₹1,004.44

+27.8% vs CMP

Target Range

₹712 – ₹1,180

Peer Comparison

Company	P/E	ROE
SUN PHARMACEUTICAL IND L	34.9x	14.5%
DR. REDDY S LABORATORIES	31.0x	8.8%
CIPLA LTD	31.8x	9.8%
DIVI S LABORATORIES LTD	83.0x	17.5%

Recent News

1 positive5 general

Natco Pharma Ltd. Rights Issue: Price, Record Date, Entitlement Ratio And Key Details

ICICI Direct, 09 Oct

Natco Pharma’s board approves rights issue worth ₹1,279 crore; check issue price, record date and more

Upstox, 25 Sept

NATCO Pharma Limited (NSE:NATCOPHARM) Looks Like A Good Stock, And It's Going Ex-Dividend Soon

Simply Wall Street, 17 AugCapital return

🟢Potentially positiveCash or shares returned to holders. A buyback is only good value if the shares were cheap when bought.

Natco Pharma Ltd. 52 Week Low Streak On Weak Share Price

Univest, 15 Oct

Natco Pharma Rights Issue 2026 Date, Price, Allotment, Ratio

IPO Watch, 01 Oct

Natco Pharma board approves rights issue to raise up to ₹1,279 crore

BusinessLine, 25 Sept

Watch Items

Revenue growth is negative (-44.7%) on the latest reported period — check if this is one-off or a trend.
Trading very close to its 52-week low — worth checking whether this reflects a temporary setback or a structural problem.
Cross-check against the company's latest quarterly filing / investor presentation before acting.
RSI is in oversold territory — could mean either a bargain or a stock still falling for good reason. Check the 'why' before assuming reversal.

DalalBaazaar Thesis

StrongBusiness Quality · Growth · Profitability · Valuation

MiddlingFinancial Health · Risk

Points for each in the Score ↑

Attractive on both counts

A good business currently available at an undemanding price — the combination this framework exists to look for. The work left is qualitative: whether the advantage the numbers imply is one you can identify and expect to last. 2 high-severity red flags sit above this conclusion and should be read first.

All 5 tripwires holding · see Key things to watch ↑