IGI Logo

Volume revival key to growth, margins

Our view

Metropolis missed on revenue and margin estimate on the back of lower specialized government contracts; Q4 expectation is for a rebound from a seasonally weak Q3 even as footfalls will remain affected due to Omicron scare in Jan. Expect FY23 to be a year of consolidation as company undertakes investment at HiTech (branding, scale up) which would dampen margin though reckon that would be a temporary phase with EBIDTA margin on track from FY24 onwards. Management indicated to faster break even in greenfield labs than before, which appears a bit of a positive surprise as increased competitive intensity and a race for volumes would have meant some pricing pressure in the routine tests - a scenario we think management had highlighted in a past conversation. Given 9m performance in line, we do not change estimates and for now retain target multiple at 55x. Why not BUY? Given the increased competition, some bit of caution on margin may be warranted in FY23 particularly if non Covid volumes do not improve beyond current 11% growth in 9m FY22. ADD stays.

Result Highlights

Revenues up 7% YoY at Rs 2,931mn, much below our estimates of 23% growth. Dr Ganesh’s Hitech Diagnostic was consolidated during the quarter

EBITDA margins down 411bps QoQ and 582bps YoY at 25.7% on account of mix and higher home visits

Non covid footfalls up 11% in 9m on a like to like basis ex-Hitech

Valuations

Given 9m performance in line, we do not change estimates and for now retain target multiple at 55x. Why not BUY? Given the increased competition, some bit of caution on margin may be warranted in FY23 particularly if non Covid volumes do not improve beyond current 11% growth in 9m FY22. ADD stays.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer