Sustainability missing .
· NIFTY (5495), Nifty after making fancy high of 6111(27 Month high) on 29th January2013 has corrected till 5487 almost 10% from recent high. Nifty has closed below 200DMA 5645 while 200 Weekly M.A 5329 would form next support.
· SENSEX (18226) has corrected till 18206 and strength is lacking and till Gap-down(19383-19378) is not crossed Month of April & May 2013 could see some pressure on overall market as we ahead towards result season and Budget session of parliament restarting 22nd April.
Pick Of the month - NATCO PHARMA
· Revenue distribution - Domestic formulations 40%, API's 28%, exports formulation 13% and others 19%.
· Recent Supreme Court ruling on Glivec case is favourable for Natco as Natco's sales from this product is ~`250m annually.
· Strong growth continues in API business and export formulation. Change in revenue mix (a higher proportion from high margin API business) is also contributing to the bottom line as well.
· API business growth is seen due to increased supply of niche category APIs to domestic & export markets and export formulation is led by recently-announced Lansoprazole approval (a prescription product).
· Successful monetization of para IV opportunities (Lansorazole OTC, Revlimid, Tamiflu, Copaxone etc) would provide substantial performance.
· This will further be reflected in improved ROCE to 16.6% by FY15 and drop in DE to 0.2 x in the same period.
· The stock trades at valuations of 15x FY14e and 12.7x FY15e earnings.
| Picks of the Last month | Reco Price | High after Reco | % returns |
| Last month Pick |
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| Rallis India (March 2013) | 126 | 130.5 | 3.57 |
| Cummins India (Feb 2013) | 502 | 518.5 | 3.29 |
| LIC Housing (Jan 2013) | 289 | 290.45 | 0.50 |
| Sun Pharmaceuticals Inds (Dec) | 715 | 887 | 24.06 |
| ING Vysysa Bank (Nov) | 471 | 607 | 28.87 |
| BASF (Oct) | 665 | 781 | 17.44 |
| Tata coffee (Sep) | 993 | 1673.9 | 68.57 |
| Bayer Cropscience (Aug) | 922 | 1341 | 45.44 |
| This month Pick | |
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| Natco Pharma (April 2013) | 444 |
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