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MedPlus delivered a solid performance in 1QFY26 with revenue up 4% YoY to 15,426 mn (slightly below estimates) and EBITDA up 39% YoY to 1,307 mn. EBITDA margin expanded by 218 bps YoY to 8.5%, though declined 56 bps QoQ on seasonal factors. PAT rose 195% YoY to 423 mn, beating estimates by 14%. Growth was led by private label segments: pharma (+45% YoY) and others (+34% YoY), while branded pharma declined 6% YoY. Private label now forms ~13.1% of revenue and 20.4% of GMV. The store network expanded with 101 net additions (4,813 total), and ROCE at mature stores remains healthy (~60%).

Management call highlights

* Pharma GMV grew 6.8% YoY. Management targets 0.5-1% quarterly PL share gain, with every 0.5% contributing ~20 bps to gross margin

* Subscale at present, with 1.64 lakh lives covered. Target is 2.5 lakh lives before deeper investment. Renewal rate stood at 24% vs 27% YoY.

* 40 warehouses (each serves 350-450 stores). 600 stores targeted for FY26; 100 to be franchisee-operated.

* Rs 7-8 lakh capex/store, Rs 3-4 lakh in deposits. New stores temporarily raise inventory days. Warehousing issues resolved.

* Employees now rewarded for topline and PL growth.

Valuation and outlook

MedPlus remains structurally well-positioned in India's organized pharmacy space, backed by its scalable hybrid model, strong private label traction, and capital-efficient expansion strategy. Key value drivers include:

* Private label momentum: Rising mix (~23% of GMV), expected to reach ~30% in 12-18 months, supporting gross margin expansion.

* Operating leverage from scale: ~78% of stores are >2 years old with 5-month breakeven and ~60% ROCE, aiding margin improvement.

* Net cash position and strong FCF (Rs 4.8 bn in FY25) reduce equity dilution risk and support reinvestment.

We estimate a Revenue / EBITDA / PAT CAGR of 14% / 23% / 36% over FY25-28E. Rolling forward to June FY28E EBITDA of Rs 7,690 mn and assigning a 20x EV/EBITDA multiple, we derive a target price of Rs 1,224, implying a 36% upside from the CMP of Rs 901.We believe this premium multiple is justified due to expanding private label contribution, with high gross margin delta,improving unit economics from store maturity and backend efficiency and scalable growth model with internal funding and prudent capital deployment. With improving PL mix, mature store contribution, and internal funding of growth, the business is well placed for sustained value creation. We recommend a BUY with a target price of 1,224.

Risks to the outlook

* Private label growth may slow due to consumer resistance or regulation. • Franchise model may face execution issues or impact brand experience.

* Delays in store additions or lack of margin expansion could hurt earnings.

* Rising competition from larger peers may pressure pricing and delivery.

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