IGI Logo

Moderate vols, mix dampen outlook

Result Synopsis

Metropolis reported another quarter of moderate volume growth of ~10% in core business (ex-Covid, PPP contract) on back of +9% volume in Q1. Margin was impacted by one-time receivables write-off (~1%) and the more recurring investment in lab network (added 7 labs in Q2). Company reiterated its lab and service centre expansion plans – additional 90 labs (to 270) and 1800 service centres (to 5,500) by 2025. We noted change in management shift on revenue generation from B2C vs earlier focus on B2B; reckon being in new places, where Metropolis brand may not have any recall, plus the focus on B2C may lead to a tough task of scaling up expanded lab infra. Overall, volumes have not matched the pre covid run rate despite the larger sourcing infra built up particularly by franchises. We believe increase in realization per patient cannot be relied upon as a sustainable trigger. Till we get a semblance of better volume growth and visibility around better utilization of new labs, it would be difficult to get constructive on the company. We largely retain EPS estimates and continue with our cautious stance and rating of Reduce with revised TP Rs1,430 (earlier Rs1,400) based on unchanged 35x FY25 PE.

Result Highlights

Core business (ex-Covid, PPP contract) revenue growth of 13% driven by 10% patient volume and 3% rise in patient realization

Wellness grew by 27% backed by 21% volume growth; contribution at 14% of sales

B2C (52% of sales) up 16% YoY with volume growth of 14%; B2B clocks 8% volume and 12% revenue growth

HiTech revenues up 17% YoY supported by 14% volume growth

Margin at 24% impacted by doubtful debt provision (1%) and investment in lab expansion (1.2%)

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