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.
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.
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.
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.
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.
|Cost of materials consumed||95.00||111.00||117.00||114.00||114.00|
|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|
|Profit After Tax||93.00||85.00||88.00||77.00||109.00|
|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|
|Trade & Other payables||5.00||1.00||14.00||-14.00||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|
|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|
|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|
|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|
|Share Warrants & Outstandings||3.00||4.00||4.00||4.00||4.00|
|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|
|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|
|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|
|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|
|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|
|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|
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.