Reviews

In this edition, we have reviewed Natco Pharma and KSB Pumps. We suggest our reader-investors to HOLD Natco Pharma and KSB Pumps 

We had recommended Natco Pharma in Volume 33, Issue No. 12, dated May 14–27, 2018, under the ‘Choice Scrip’ section. The shares of the company was then trading at Rs 796.7. We had recommended the stock looking at the robust product portfolio, its high emphasis on R&D and its relatively insulated US portfolio. 

Natco Pharma is engaged in developing, manufacturing and marketing of finished dosage formulations (FDFs) as well as active pharmaceutical ingredients (APIs). The company’s segments include pharmaceuticals ingredient, finished dosage formulations, pharmacy and others. The company’s product categories include domestic formulations, international formulations, APIs and blockbusters. 

On the financial front, the net sales of the company has grown by 19.9 per cent to Rs 515.70 crore in Q1FY19 versus Rs 430 crore in the same quarter of the previous year. The PBDT of the company stood at Rs 258.10 crore in Q1FY19 and witnessed a rise of 85 per cent YoY from Rs 139.50 crore. The net profit too had a tremendous growth of more than 90 per cent YoY to Rs 188.60 crore in Q1FY19 versus Rs 97 crore. 

In annual terms, the net sales have more or less remained stable with a 5 per cent increase to Rs 2108.50 crore in FY18 as against Rs 2,002.80 crore in FY17. The PBDT of the company in FY18 was Rs 953.10, showing a growth of 38 per cent from Rs 687.70 crore in Fy17. The company has witnessed 41 per cent increase to Rs 698.20 crore in FY18 as against Rs 494.80 crore in the previous fiscal. 

Since our recommendation, the share price has fallen by 17 per cent approximately. The stock is likely to recover as it is evident from the financials. Hence a HOLD is recommended.

We had recommended KSB Pumps in Volume 33, Issue No. 6, dated Feb 19–Mar 4, 2018, under the ‘Special Report’ segment. The stock was trading at Rs 812 then and was recommended because it demonstrated healthy financials, offered promising returns on account of favourable monsoons and the thrust provided by Budget 2018. KSB provides products and services catering to building services, process engineering applications, waste water, mining and energy applications. The company provides solutions for areas of automation and drive technology. 

KSB is not only a major manufacturer of pumps and industrial valves, but also provides a wide range of services in engineering and IT. The company has sales and marketing organisations, manufacturing facilities and service operations across several continents. The major operational segments include pumps, valves and others such as manufacturing of castings. 

On the financial front, the company’s net sales have slightly improved by 13 per cent to Rs 256.60 crore in Q1FY18 as against Rs 223.10 crore in Q1FY18. The PBDT of the company has also grown by 23 per cent in Q1FY19 to Rs 37.90 crore, while in the same quarter of the previous year it was Rs 30.72 crore. The net profit of the company has moved up by 40 per cent YoY to Rs 21.40 crore in Q1FY19 as against Rs 15.35 crore. On an annual basis, the company has recorded 17 per cent growth in net sales to Rs 969.23 crore in FY18 versus Rs 827 crore in FY17. The net profit of the company has marginally grown by 9 per cent in FY18 to Rs 67 crore versus Rs 61 crore in FY17. Since our recommendation over the eight months, the share price has dipped by about 14 per cent. We would recommend a HOLD as the coming quarters are likely to witness improved performance by the company.