Thyrocare Technologies - Management call highlights - ICICI Securities

Thyrocare Technologies (Thyrocare) held a call to discuss Q2FY21 result and recovery from the impact of COVID-19 pandemic. Given below are the highlights from the concall:

- Quarter's performance was largely driven by COVID-19 tests. Company conducted antibody tests for several corporates, which started in late Jun'20. Company expects this trend to continue in near term, especially with the easing of lockdown. Volume of RT-PCR tests have started reducing gradually with lower incidences of new cases, higher capacity with government as well as higher proportion of antigen testing. Average price of antibody and RT-PCR test was ~Rs450 and ~Rs1,700, for the quarter. However, these prices are being revised downwards frequently.

- Company expects COVID-19 testing to continue into next year as well; however, its proportion to the overall volume and sales will decline as non-COVID (regular) tests are witnessing recovery. Regular tests in Sep'20 were similar to last year and trend in recovery is encouraging.

- Company started COVID-19 testing at its Delhi lab in Oct'20. It is investing in this lab to make it a prominent regional lab with testing capacity similar to its Mumbai national lab. Company has identified land in Bengaluru and is searching for one in Kolkata to create additional regional labs. It intends to expand its network via these regional labs as well as its franchise base/Thyrocare service providers. Over the long term, the company plans to double its reach using franchise and regional labs.

- Hospitals, clinics, IVFs, etc. are few channels where the company is trying to make headway, as it would provide additional growth opportunities. It is also using digital medium to increase reach and attract B2C business.

- Post COVID-19, the company has witnessed a healthy rise in home collection and decline in centre collection. It believes this will benefit its existing infrastructure. Awareness for preventive and wellness care has risen due to the pandemic and steady rise in this business is likely as things normalise. Recovery in Thyrocare's 'Aarogyam' scheme of bundling tests is an indicator of this.

- Company will stay true to its low value and high volume business strategy and not invest heavily into specialised tests such as genetic testing.

- Nueclear (Imaging business) witnessed healthy recovery in the quarter despite three centres not being operational and Coimbatore centre shifting to a new location. Before COVID-19 outbreak, all centres except Bengaluru were at breakeven. The company has no major capex planned in this segment in near to medium term and expects stable performance in two quarters from now.

Valuations and risks: Concern on sustainability of COVID-19 revenue and slower growth in the base business coupled with the recent run up in the stock has made valuations expensive; hence, we maintain REDUCE with a DCF-based target price of Rs986/share, implying 33.2xFY23E earnings and 21.5xFY23E EBITDA. Key upside risks: Faster recovery in preventive care business and incremental tie-ups with standalone labs for sample processing.

Shares of Thyrocare Technologies Ltd was last trading in BSE at Rs.1138.6 as compared to the previous close of Rs. 1150.2. The total number of shares traded during the day was 11329 in over 635 trades.

The stock hit an intraday high of Rs. 1178.7 and intraday low of 1138.5. The net turnover during the day was Rs. 13085347.

Source : Equity Bulls

Keywords