NATCO PHARMA: A Multiyear Breakout Set to Double Your Investment

8월 6일

Investment Advice by Goodluck Capital (SEBI Registered)

• Buy Natco PharmaNATCOPHARM
• Buy Range- 1210 - 1220
  
• Target- 1950 - 1960
  
• Potential Return- 60-62%
  
• Approx investment period 12 - 14 months

TECHNICAL ANALYSIS NATCOPHARM
(1) Back in 2017, Natco Pharma encountered several rejections around the 1,050 level, leading to a subsequent decline.
(2) The 500 level has emerged as a crucial support point, allowing the stock to bounce back from this threshold.
(3) Although the stock made an attempt to surpass its trendline resistance in July 2021, it ultimately fell short, resulting in another correction before finding support at the 500 level once more.
(4) Since March 2023, the stock has been on an upward trajectory, successfully breaking through the resistance level in July 2024.
Following this significant multi-year breakout, there is a strong expectation that the stock will remain above the breakout zone, paving the way for a robust upward rally.

● ENTRY & EXIT LEVELS
- Look for the best buy levels between 1,210 and 1,220, as this is also the breakout level. However, if the stock begins to consolidate at that level and subsequently breaks out, the upper boundary of this consolidation could present another lucrative entry point.
- Based on the chart analysis, it appears that there is a 60% upside potential for this stock, hovering around the 1,950-1,960 level. Moreover, there is a possibility that the stock may surpass this level.

FUNDAMENTAL ANALYSIS NATCOPHARM
● PE RATIO
- The stock's current PE stands at 16.9, slightly higher than the 1-year median PE of 14.2 but lower than the 5-year median PE of 26.3.
- With an industry PE of 36.6, the stock appears undervalued.
● PB RATIO
- The present PB ratio for this stock stands at 3.96, indicating a slightly high valuation but not reaching overvalued territory.
● DEBT TO EQUITY RATIO
- The company's debt to equity ratio of 0.06 indicates that it is nearly debt-free.

● PROFIT & LOSS ANALYSIS

- Over the last three years, this stock has experienced a remarkable compounded annual sales growth rate of 25%.
- The cumulative profit increase over the past three years has been an impressive 49%, indicating a strong upward trend.
- The profit margin has seen a significant boost, rising to 44% from 35% YoY.
- The EPS growth for FY24 is remarkable, soaring to 77.5 compared to just 39 in FY23.

● CASH FLOW ANALYSIS

- There is a substantial increase in operating cash flow, jumping by almost 43% to 1,212 crore from 849 crore in FY23.

● SHAREHOLDING PATTERN

- The promoters have consistently held their stakes at 49.71% over the past three quarters.
- Over the last four quarters, FIIs have been steadily increasing their investments, in contrast to DIIs who have been offloading their stakes.