Thyrocare Technologies Ltd - Research Report
Private Client Research
Rating
Buy
Sector
Healthcare Services - Diagnostic
Company
Healthcare Services - Diagnostic
August 18, 2020
Sensex: 38528.32
CNX Nifty: 11385.35
NSE: THYROCARE
BSE: 539871
Reco Price
Rs. 790
Price Target (2 - 3 Years)
Rs. 1340
Upside
69.62%
Date
August 18, 2020
Sensex
38528.32
CNX Nifty
11385.35
Exchange
Code
NSE
THYROCARE
BSE
539871
Stock Data
CMP (Rs)
785.70
Face value (Rs)
10
52 Week Range (Rs)
845.90 - 409.60
Market cap (Rs Crores)
4155.32
Price To Book Value (x)
10.80
P/E Ratio (x)
64.82
EV/EBIDTA (x)
27.88
One Year indexed Stock Performance
Thyrocare Technologies Ltd
Sensex
Return (%)
1m
3m
12m
36m
Absolute
30.35
56.10
69.49
11.28
Sensex
2.96
28.30
3.01
22.22
Shareholders
(in %)
30-Jun
Promoter
66.04
Public
33.96
Others
0
Total
100
+91 22 6639 3000
research@stockaxis.com
Profile
Incorporated in 2000, Thyrocare Technologies Ltd (Thyrocare) is India's first fully automated diagnostic laboratory with a focus on providing quality at affordable costs to laboratories and hospitals in India and other countries. Thyrocare is a Pan-India diagnostic chain conducting an array of medical diagnostic investigations that focus on early detection and management of disorders. Thyrocare operates with a Centralized Processing Laboratory (CPL) in Mumbai - India for esoteric tests; and Regional Processing Laboratories (RPL) in major metro cities of India and other parts of Asia. Thyrocare’s focus is on using robust technologies, and building a strong brand and systems that enable the company’s laboratories to give their clients the best of science and technology at an affordable cost. The company has a wholly owned subsidiary Nueclear Healthcare Ltd (NHL) which is engaged in cancer related diagnostic testing through fusion imaging technology viz. PET-CT scans, nuclear scanning, etc.
The company’s pan India network with affordable pricing and best-in-class automation infrastructure provides competitive edge
Rationale for Investment
Affordable testing with emphasis on wellness and preventive healthcare
The company’s diagnostic tests are offered at one of the lowest prices in
the industry. It has a portfolio of specialised tests with major focus on growing
its wellness and preventive offerings and bolstering test offerings through aggressive
price rationalisation. The company is a leader in preventive care diagnostic test
offerings with ‘Aarogyam’ brand providing multiple profiles of
30-40 metabolic tests at economical prices, facilitating early detection of lifestyle-related
disorders, thus ensuring wellness of individuals. It is making significant
marketing efforts to promote its preventive diagnostic and wellness offerings.
Network expansion will boost volume growth
The company plans to strengthen and grow its coverage across India by growing its
network of authorised service providers. With this, it plans to simultaneously increase
its customer base, generate higher volume of samples for processing, improve turnaround
time and optimise logistic costs. The company has a well-spread presence covering
all states; it is now targeting an untapped client base by penetrating deeper into
the regions by offering on-door services to smaller clinics, dispensaries, laboratories
and hospitals.
Widening revenue channels to provide significant growth opportunities
The company intends to expand its diagnostic test offerings through the acquisition
of new technologies, including both instruments and processes. The company entered
into two strategic segments of tuberculosis and non-invasive pregnancy testing,
by offering disruptive pricing and high quality. Both these segments are largely
populated by unorganised players and offer significant opportunities for growth.
Fully automated and IT enabled lab provides efficient operations
Thyrocare is the only diagnostic laboratory to have introduced barcoding system
across the company’s collection points nationwide. The output data is synchronized
with the software to generate and upload the reports on the website, making the
entire process agile and error-free. These systems ensure that right tests are done
on the right specimen, and right results are dispatched to the right people at the
right time and right cost. Further these systems help in curtailing the time consumed
or lost in pre-analytical procedures and offers a smooth, hassle free and effective
operation.
Covid-19 impact:
Due to the pandemic, business operations will have an adverse impact in the near
term, but we expect the company’s performance to stabilize as it is engaged
in providing essential medical services, supported by providing COVID19 tests using
RT-PCR technology.
Risks
Increasing competition: In addition to established players in the market, a number
of new start-ups have forayed into the market which may be detrimental to the company’s
growth in the future.
Industry
India’s diagnostic market is small when compared to that in developed countries; it is amongst the fastest-growing segments in the pharma sector. The industry is dominated by small and regional unorganised diagnostic laboratories, that control more than 70% of the total diagnostic market. Due to significant latent demand emerging on the back of improving economic conditions in the country and a rapidly emerging urban population, a significant chunk of unorganised players converting to organised. According to industry estimates, the diagnostic market is anticipated to grow at 16-17%, with the general expectation of organised chains delivering stronger growth. In India’s healthcare industry, diagnostic services play the role of an information intermediary, providing useful information for the accurate diagnosis and treatment of patients’ diseases. India’s diagnostic industry is classified into pathology testing and imaging diagnostic services. Pathology testing involves sample collection (blood, urine, stool, etc.) and analysing them using laboratory equipment and technology to arrive at useful clinical information for assisting in the treatment of patients’ diseases. Imaging diagnosis or radiology involves imaging procedures such as X-rays and ultrasounds as well as complex tests such as CT scans, MRIs and highly specialised PET-CT scans.
Financials
Profit & Loss Statement:- (Consolidated)
(Rs Crores)
| Year end | 2018 | 2019 | 2020 | 2021E | 2022E |
|---|---|---|---|---|---|
| Net Sales | 356.00 | 403.00 | 433.00 | 371.00 | 427.00 |
| Cost of materials consumed | 95.00 | 111.00 | 117.00 | 114.00 | 114.00 |
| Gross Profits | 261.00 | 292.00 | 316.00 | 258.00 | 313.00 |
| Employee Cost | 35.00 | 43.00 | 49.00 | 44.00 | 46.00 |
| Other expenses | 81.00 | 95.00 | 95.00 | 82.00 | 92.00 |
| EBITDA | 145.00 | 154.00 | 173.00 | 131.00 | 175.00 |
| Margins% | 41.00% | 38.00% | 40.00% | 35.00% | 41.00% |
| Depreciation | 20.00 | 26.00 | 32.00 | 34.00 | 39.00 |
| EBIT | 125.00 | 128.00 | 141.00 | 97.00 | 136.00 |
| Other Income | 23.00 | 10.00 | 8.00 | 8.00 | 10.00 |
| Interest | 0.00 | 1.00 | 2.00 | 2.00 | 2.00 |
| Profit Before Taxation & Exceptional Items | 147.00 | 138.00 | 146.00 | 103.00 | 145.00 |
| Exceptional Income / Expenses | -2.00 | 0.00 | -7.00 | ||
| Profit Before Tax | 145.00 | 138.00 | 140.00 | 103.00 | 145.00 |
| Provision for Tax | 52.00 | 53.00 | 52.00 | 26.00 | 36.00 |
| PAT | 93.00 | 85.00 | 88.00 | 77.00 | 109.00 |
| EPS | 17.00 | 16.00 | 17.00 | 15.00 | 21.00 |
Source: Stockaxis Research, Company Data
Cashflow Statement
(Rs Crores)
| Particulars | 2018 | 2019 | 2020 | 2021E | 2022E |
|---|---|---|---|---|---|
| Profit After Tax | 93.00 | 85.00 | 88.00 | 77.00 | 109.00 |
| Depreciation | 20.00 | 26.00 | 32.00 | 34.00 | 39.00 |
| Operating Cash Flow before Working Capital Changes | 114.00 | 111.00 | 120.00 | 111.00 | 148.00 |
| Working Capital Changes | |||||
| Trade & Other receivables | -4.00 | -2.00 | -4.00 | 0.00 | 2.00 |
| Inventories | -3.00 | -1.00 | -3.00 | 2.00 | 1.00 |
| Trade & Other payables | 5.00 | 1.00 | 14.00 | -14.00 | 0.00 |
| Others | 3.00 | 2.00 | 0.00 | 0.00 | 0.00 |
| Changes In working Capital | 2.00 | -1.00 | 8.00 | -13.00 | 3.00 |
| Cash Flow after changes in Working Capital | 116.00 | 111.00 | 128.00 | 99.00 | 151.00 |
| Other Items | -9.00 | -10.00 | 40.00 | 0.00 | 0.00 |
| Cash From Operating Activities | 107.00 | 100.00 | 168.00 | 99.00 | 151.00 |
| Cash Flow from Investing Activities | |||||
| Purchase of Fixed Assets | -44.00 | -40.00 | -10.00 | -20.00 | -60.00 |
| Sale of Fixed Assets | 0.00 | 1.00 | 0.00 | 0.00 | 0.00 |
| Others | 0.00 | 27.00 | 11.00 | 0.00 | 0.00 |
| Cash Flow from Investing Activities | -43.00 | -12.00 | 1.00 | -20.00 | -60.00 |
| Free Cash Flows | 63.00 | 60.00 | 158.00 | 79.00 | 91.00 |
| Cash Flow from Financing Activities | |||||
| Proceeds from Long Term Borrowings | 0.00 | 3.00 | |||
| Increase / (Decrease) in Loan Funds | 0.00 | 3.00 | 0.00 | 0.00 | 0.00 |
| Equity Dividend Paid | -54.00 | -27.00 | -132.00 | -27.00 | -33.00 |
| Income tax on dividend paid | -10.00 | -6.00 | -27.00 | -5.00 | -7.00 |
| Others | 0.00 | -64.00 | -6.00 | -30.00 | -20.00 |
| Cash from Financing Activites | -64.00 | -94.00 | -165.00 | -62.00 | -59.00 |
| Net Cash Inflow / Outflow | 0.00 | -5.00 | 4.00 | 17.00 | 28.00 |
| Opening Cash & Cash Equivalents | 10.00 | 10.00 | 5.00 | 9.00 | 26.00 |
| Closing Cash & Cash Equivalent | 10.00 | 5.00 | 9.00 | 26.00 | 57.00 |
Source: Stockaxis Research, Company Data
Balance Sheet
(Rs Crores)
| Particulars | 2018 | 2019 | 2020 | 2021E | 2022E |
|---|---|---|---|---|---|
| Share Capital | 54.00 | 53.00 | 53.00 | 53.00 | 53.00 |
| Total Reserves | 387.00 | 378.00 | 308.00 | 353.00 | 422.00 |
| Share Warrants & Outstandings | 3.00 | 4.00 | 4.00 | 4.00 | 4.00 |
| Shareholders' Funds | 443.00 | 435.00 | 364.00 | 409.00 | 479.00 |
| Non-current Liabilities | |||||
| Deferred Tax Assets / Liabilities | -5.00 | -5.00 | 4.00 | 4.00 | 4.00 |
| Long Term Burrowing | 0.00 | 3.00 | 3.00 | 3.00 | 3.00 |
| Secured Loans | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Unsecured Loans | 0.00 | 3.00 | 3.00 | 3.00 | 3.00 |
| Other Long Term Liabilities | 10.00 | 10.00 | 8.00 | 8.00 | 8.00 |
| Long Term Provisions | 5.00 | 7.00 | 8.00 | 8.00 | 8.00 |
| Total Non-current Liabilities | 10.00 | 14.00 | 23.00 | 23.00 | 23.00 |
| Current Liabilities | |||||
| Trade Payables | 7.00 | 8.00 | 22.00 | 8.00 | 8.00 |
| Other Current Liabilities | 8.00 | 11.00 | 58.00 | 58.00 | 58.00 |
| Short Term Provisions | 6.00 | 2.00 | 2.00 | 2.00 | 2.00 |
| Total Current Liabilities | 20.00 | 21.00 | 82.00 | 68.00 | 67.00 |
| Total Equity & Liabilities | 474.00 | 470.00 | 469.00 | 500.00 | 569.00 |
| ASSETS | |||||
| Non-Current Assets | |||||
| Gross Block | 336.00 | 355.00 | 337.00 | 357.00 | 417.00 |
| Less: Accumulated Depreciation | 37.00 | 61.00 | 93.00 | 127.00 | 166.00 |
| Less: Impairment of Assets | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Net Block | 299.00 | 294.00 | 244.00 | 230.00 | 251.00 |
| Lease Adjustment A/c | 0.00 | 0.00 | 25.00 | 25.00 | 25.00 |
| Capital Work in Progress | 0.00 | 1.00 | 5.00 | 5.00 | 5.00 |
| Non Current Investments | 20.00 | 21.00 | 21.00 | 21.00 | 21.00 |
| Long Term Loans & Advances | 12.00 | 17.00 | 22.00 | 22.00 | 22.00 |
| Total Non-Current Assets | 331.00 | 334.00 | 317.00 | 303.00 | 324.00 |
| Current Assets Loans & Advances | |||||
| Currents Investments | 100.00 | 75.00 | 69.00 | 99.00 | 119.00 |
| Inventories | 17.00 | 18.00 | 21.00 | 19.00 | 18.00 |
| Sundry Debtors | 10.00 | 12.00 | 16.00 | 17.00 | 14.00 |
| Cash and Bank | 12.00 | 10.00 | 11.00 | 26.00 | 57.00 |
| Other Current Assets | 2.00 | 20.00 | 32.00 | 32.00 | 32.00 |
| Short Term Loans and Advances | 2.00 | 2.00 | 3.00 | 5.00 | 5.00 |
| Total Current Assets | 142.00 | 136.00 | 152.00 | 197.00 | 245.00 |
| Net Current Assets (Including Current Investments) | 122.00 | 115.00 | 70.00 | 129.00 | 177.00 |
| Total Current Assets Excluding Current Investments | 22.00 | 41.00 | 1.00 | 30.00 | 58.00 |
| Total Assets | 474.00 | 470.00 | 469.00 | 500.00 | 569.00 |
Valuation
We expect the company to capture incremental growth opportunities driven by an increase in healthcare spending by an aging population, rising awareness for preventive testing and advanced healthcare diagnostics tests. Further, we believe the company’s focus on expanding its product portfolio and its commitment to scale up operations to greater capacity utilisation will propel its growth. The stock is currently trading at 38.4x FY22E EPS.