Earnings Call Transcript Analysis Report #
MedPlus Health Services Limited - Q3 FY25 Earnings Call Analysis #
Financial Performance #
- Key Financial Metrics (Q3 FY25):
- Consolidated Revenue: INR 15,614 million (Growth of 8.3% Y-o-Y, Degrowth of 0.9% Q-o-Q).
- Consolidated Operating EBITDA: INR 799 million (Margin: 5.1%).
- Pharmacy Operations Revenue (constituting ~99% of total):
- GMV Basis: Grew by 12.3% Y-o-Y.
- Net Basis: Grew by 7.9% Y-o-Y.
- Pharmacy Operating EBITDA: INR 780 million (Margin: 5.1%).
- Stores >12 Months Old:
- Revenue: INR 14,388 million (94% of pharmacy revenue).
- Store Level EBITDA Margin: 11%.
- Store Level Operating ROCE: 61.7%.
- Operating EBITDA (after allocated non-store related cost): INR 815 million (Margin: 5.6%).
- Diagnostics Revenue: INR 274.7 million (Growth from INR 196 million in Q3 FY24).
- Diagnostics Operating EBITDA: INR 22.1 million (Margin: 8.1%) (Compared to a loss of INR 34.1 million in Q3 FY24). Central level operating EBITDA for Diagnostics was INR 49 million.
- Private Label Sales (Q3 FY25): 19.6% of total revenue.
- Private Label Pharma Share (of total GMV): 17.7% (up from 7.9% in Q1 FY24).
- Net Working Capital (Q3): 61 days.
- Warehouse Inventory: 36 days.
- First-tier Store Inventory: 88 days.
- Stores >12 months Inventory: 40 days.
- Comparison with Previous Periods:
- Consolidated revenue showed moderate Y-o-Y growth but a slight Q-o-Q dip.
- Pharmacy GMV growth was stronger than net revenue growth, likely due to increasing private label share (sold at lower prices).
- Diagnostics segment showed significant improvement, turning profitable Y-o-Y.
- Private label contribution to revenue and GMV has substantially increased compared to Q1 FY24.
- Revised Guidance or Forecasts:
- Net store additions for FY25 expected to be 300 (down from previous, implicit higher targets given earlier quarter run-rates).
- Net store additions for FY26 guided at “at least 600 stores.”
- Private label volume (MRP basis) expected to grow by ~1% per quarter, translating to an additional margin of ~15-20 bps per quarter.
- Areas of Growth or Decline:
- Growth: Private label sales (significant), Diagnostics business (revenue and profitability), overall pharmacy GMV (Y-o-Y).
- Decline/Slowdown: Net store additions were lower this quarter (60 net additions vs 108 in Q2). Consolidated revenue saw a slight Q-o-Q degrowth. SSSG seems to be in the low single digits (4-5% guided for future).
Strategic Initiatives & Business Updates #
- Major Strategic Announcements:
- Strong focus on balancing growth with profitability and enhancing operational efficiency.
- Strategic strengthening of back-end operations and infrastructure for long-term scalability.
- Launch of MedPlus brand private label products continues to be a core strategy.
- New Products, Services, or Markets Discussed:
- Private Label Expansion: Currently over 1,200 SKUs. Aim to increase the number of products in private label, targeting up to 75-77% of applicable medicine range (currently at ~68%).
- Warehouse Expansion: Added 4 additional warehouses recently. Plan for a total of ~10 smaller warehouses (30,000-50,000 sq ft).
- Significant Operational Changes:
- Restructuring supply chain by dividing states into main and sub-areas managed by local warehouses to improve reach and efficiency.
- Focus on new store breakeven: Approximately 55% of stores opened between January 2024 and June 2024 achieved breakeven within 6 months of operations.
- Ongoing or Completed Projects:
- Backend strengthening and warehouse setup is ongoing, expected to be completed in Q4 FY25.
Market & Competitive Landscape #
- Insights about Industry Trends:
- Implied acceptance and potential growth of generic/private label pharmaceuticals.
- Government push for generic products seen as a potential tailwind.
- Competitive Positioning Statements:
- MedPlus positions its private label as a high-quality, significantly discounted alternative to branded medicines.
- Focus on store-level profitability (10-11% EBITDA for mature stores) rather than solely on SSSG, especially in markets with high store density.
- Market Challenges or Opportunities Mentioned:
- Challenge: Cannibalization in mature markets due to new store openings.
- Challenge: Quick commerce competition is being monitored.
- Opportunity: Increasing private label penetration.
- Opportunity: Expanding store network into new areas and deepening presence in existing ones with better supply chain support.
- Comments about Market Share or Positioning:
- Aim to continue gaining market share through store expansion.
- Private label penetration varies by geography.
Risk Factors & Challenges #
- Concerns or Challenges Acknowledged by Management:
- Slower Store Additions: Current year’s store addition pace (target 300 net) is lower than initially implied, attributed to focus on private label rollout and backend strengthening.
- Muted GMV Growth (this quarter): Attributed partly to seasonality and the impact of private label (lower price point).
- Supply Chain Strain: Past rapid growth had strained the supply chain, impacting sales. This is being addressed with new warehouses.
- Cost Pressures: Wage increases and new warehouse rents impacting EBITDA.
- Supply Chain or Operational Constraints: Addressed above (strain, ongoing strengthening).
- Market Uncertainties: Impact of quick commerce is being monitored.
Forward-Looking Statements #
- Outlook and Future Projections:
- Store Expansion: Expect 300 net store additions in FY25; “at least 600 stores” in FY26.