Natco Pharma margin drops as stock falls 24.02% in five sessions
Revenue fell 39.47% year on year, while a tax benefit and other income supported the Rs 269.0 cr consolidated profit.
Filed 29 May 2026, 14:21 IST · Natco Pharma Ltd (NATCOPHARM)
Key takeaways
- Consolidated operating margin fell 27.63 percentage points year on year to 17.26% as revenue declined faster than expenses.
- Net profit rose 77.79% sequentially to Rs 269.0 cr, helped by a -49.61% tax rate and other income contributing 63.13% of pre-tax profit.
- The stock fell 13.60% on the result day and 24.02% in five sessions, far exceeding its 1.30% median move after the past eight results.
Price around the results
Revenue recovery did not prevent a sharp yearly decline
Consolidated revenue rose 14.18% sequentially to Rs 739.1 cr but was down 39.47% year on year, reflecting a much weaker comparison with Q4FY25. Operating profit fell 19.60% sequentially and 76.72% year on year. Natco’s 17.26% operating margin was 6.12 percentage points below the 23.38% median for 48 Healthcare peers that had reported the quarter, placing it ninth from the bottom.
Costs outpaced sales and compressed operating margin
Sequentially, expenses grew 25.15% against revenue growth of 14.18%, narrowing operating margin by 7.26 percentage points. Year on year, revenue fell 39.47% while expenses declined only 9.12%, driving a 27.63 percentage-point margin contraction. This was the third straight quarterly decline in operating margin, from 42.97% in Q1FY26 to 42.49% in Q2FY26, 24.52% in Q3FY26 and 17.26% in Q4FY26.
Reported profit quality was shaped by tax and other income
Net profit increased 77.79% sequentially even as operating profit declined, because the tax rate moved from 12.03% to -49.61% and other income rose 64.49%. Other income accounted for 63.13% of pre-tax profit, while interest expense also increased 14.74% sequentially. Year on year, net profit still fell 33.74% and EPS declined 34.10% to Rs 14.96.
The market reaction was unusually severe for Natco
The stock fell 13.60% on the result day, with the decline extending to 24.02% after five sessions; trading volume was 6.69 times the reference level on day zero. Across the past eight results, the stock rose after three and fell after five, with a median absolute move of 1.30%, making this reaction much larger than its usual post-result move. The five-session relative return was -21.76%.
Q4FY26 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q4FY26 | Q3FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹739 cr | ₹647 cr | +14.18% | -39.47% |
| Other income | ₹114 cr | ₹69 cr | +64.49% | +71.19% |
| Expenses | ₹612 cr | ₹489 cr | +25.15% | -9.12% |
| Operating profit | ₹128 cr | ₹159 cr | -19.60% | -76.72% |
| Operating margin (%) | 17.26% | 24.52% | — | — |
| Interest | ₹11 cr | ₹10 cr | +14.74% | +6.86% |
| Depreciation | ₹50 cr | ₹46 cr | +9.09% | -48.73% |
| Profit before tax | ₹180 cr | ₹172 cr | +4.53% | -64.46% |
| Tax | ₹-89 cr | ₹21 cr | — | — |
| Net profit | ₹269 cr | ₹151 cr | +77.79% | -33.74% |
| EPS (₹) | ₹14.96 | ₹8.46 | +76.83% | -34.10% |
Operating margin of 17.26% compares with a Healthcare sector median of 23.38% across 48 peers that have reported Q4FY26.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -13.60% | -12.10% |
| Next session | -20.62% | — |
| 5 sessions | -24.02% | -21.76% |
| 15 sessions | -24.39% | — |
| 30 sessions | -16.66% | — |
Volume on the results session was 6.69× its 20-day average.
What to watch
- Whether operating margin stabilises above 17.26% after three consecutive quarterly declines.
- Whether revenue growth can remain positive after the sequential increase of 14.18%.
- Whether net profit remains less dependent on the -49.61% tax rate and other income's 63.13% share of pre-tax profit.