Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Medplus Health Services Ltd (BOM:543427, Financial) has expanded its network to 4,444 pharmacy outlets across 650 cities in 10 states.
- The company has seen a significant increase in private label sales, which now constitute 15.8% of total revenue.
- Revenue from pharmacy operations grew by 24% year-on-year on a GMV basis.
- Diagnostic segment revenue grew to INR242 million in Q1 FY25 compared to INR139 million in Q1 FY24.
- The company has a strong presence in Tier 2 cities and beyond, with 45% of its stores located in these areas.
Negative Points
- Q1 is typically a slow quarter for Medplus Health Services Ltd (BOM:543427), impacting overall performance.
- There were 29 store closures in Q1, resulting in a net addition of only 37 stores compared to 174 in Q4.
- The operating EBITDA margin for the quarter was relatively low at 2.9%.
- There was a significant marketing spend of INR95 million, which impacted profitability.
- Inventory provisioning and other adjustments negatively affected gross margins by approximately 0.5%.
Q & A Highlights
Q: Sir, my question is that, whether do we need to revisit our guidance? Or are we reiterating our guidance of 20%-plus top line growth? And you are maintaining 4Q level margin?
A: No, I don't think we need to change anything out there, as we mentioned earlier, Q1 is typically slow and that's what it is. I don't think there's anything more to look beyond that, honestly.
Q: Sure. And sir 16% growth looks very weak given specifically, if you look at pharma companies growth who tried even the largest player had recorded almost 16% year-on-year growth. So just wanted to understand that have you played out in terms of market share against even our sales growth? Also looks a little tepid. So just wanted to understand that in or is it something or is it a market specific trend or there is some one-off in (inaudible)
A: It's actually 23% given that a significant portion of our sales is now coming from MedPlus private-label and these are all selling at half the price of a regular brands, right? So any growth on this is going to definitely affect the overall top line. So if you look at it MRP to MRP and if you compare like to like out there, our growth is actually 23%.
Q: And sir, GMV growth is 23%, So the 20% plus growth, which you have guided for that is for reported revenue or that is for GMV revenue.
A: No, that's actually for normal reported revenue only for this year.
Q: Understood, and sir, our stores and rigs are relatively better in terms of gross margin side, but still we have seen a good 50% decline sequentially. So just wanted to understand that, is there any inventory write-off during the quarter.
A: See a while a private label margin is definitely better than the regular branded margin and all. The two things happening here. One, we are cannibalizing into the old private-label, which had a slightly higher margin. And this one, as you know, while it is better, it is not as good as the old private-label. We actually have a 52% to 55% overall discount on this product.
Q: Hello good evening. Yeah, I was just trying to gauge the baseline margin performance of the stores. So what I'm looking at is in 1Q FY24 the overall retail pharmacy had an operating EBITDA margin of 2.7%. And on the like-for-like basis, if I look at 12 month plus operating EBITDA margin that is reported in this quarter, that's 3.8% so that's roughly like 110 bps of increase on the stores, the baseline stores, excluding the stores that were not added particularly.
A: Sure, so in terms of your own your order, the way we have to look at it due to the change in the private-label pharma me, which has increased from 7.98% to 9.5%. There was an additional margin net of the cannibalization of our own private-label. We were able to increase gross margin by 60 basis points.
Q: Hi, good evening. Thank you so much for your time. I wanted to understand that given that there is a big product mix category mix change which is playing out in the company, is it more accurate to look at the company on a per store like should we look at EBITDA per store or gross profit per store? Would that be a better reflection of the profitability?
A: Sure Madhav, as we have said earlier, we were running a pilot in Tamil Nadu and that on count we ended INR29.5 crores. While it is -- we didn't get what we expected. I don't think we're going to go and spend any more money. Or at least to this level in the next in the coming quarters, so this. Is not a recurring expenditure, so if you take that out, definitely from a 3%, it goes up to 3.6% for MedPlus Pharmacy.
Q: Thank you for the opportunity, sir. I have two questions. One is are generally will, if you will notice about our stores suspension and there are a lot of notices about contain a month. So is there a specific reason behind those stores or time span or can we not control running advanced before retailing is not easy, that is the first question?
A: Okay, great. Answer to your first question, it's -- see the suspensions unfortunately, some of them are at least a part of the business in a large network of 4,444 stores. And as you know, health care specialty pharmacy is a highly leverageable regulated business and there's always some small issue or the other for which you could receive a small suspension.
Q: Hello. Some questions around the gross margins. Could you please give us the breakup of the gross margin segment wise that is the private label pharma of the private label non-pharma and the branded pharma and branded FMCG businesses?
A: (inaudible) branded pharma, we would guide between 13% and 13.1% private-label Pharma, which was our old private-label in the range of 74% to 76% of newly launched MedPlus store-level brand in the range of 64% to 66% gross margin, branded non-pharma products in the range of 10.5% to 11% and private-label non-pharma products in the range of 16% to 18%.
Q: Hey, good evening. Thanks for the all the (inaudible) In terms of store additions, this quarter seems to be on the lower side. While we had guided for around (inaudible) in the stores for '25, are we still maintaining that number?
A: Yeah. So the there's no change in guidance. If you have seen the last couple of years also, we usually do slightly better in the second, third and fourth quarters usually. This year Q1 was unduly, I would say, kind of depressed because of a couple of reasons for one of the main reasons was elections, I would say, actually had a lot of attrition and we had a lot of people and we were finding it a little difficult to pay at the back end of people during that month.
Q: Yeah, so firstly, could you just call out what was the net add and marketing expense for the quarter versus the same thing last year?
A: Sure, I just had to be ended up, spending INR9.5 crores in this quarter versus Q1 of last year was INR1
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
