IGI Logo

Lack of volume traction keeps us away

Result Synopsis

Dr Lal delivered no surprises in volume growth or revenues in Q1 and rather we reckon patient footfall growth at 5.5% was again underwhelming while test volume was up 9% YoY. With ever increasing Swasthfit share to 25% (vs 22% YoY) and rising 150bps every year, some of the repeat patient volume in the discretionary bucket would be upsold the wellness program. This could be pulling down the overall footfall growth though patient volume originating due to sickness should be unaffected. Margin continues to hold at higher level despite Suburban OPM at 14% and penetration in to Tier 3 and 4 towns. We lower patient volume growth assumption to ~6-9% from 8-10% earlier offset by better realization due to rising Swasthfit share. Overall, estimates remain unchanged; indeed, in the last 12 months, our FY25 revenue estimate have hardly changed at Rs24.8bn even as elevated margin has driven EPS upgrade (~11% to Rs52). We retain our target multiple and TP at Rs2,550, based on 40x FY26 EPS and downgrade to Sell as lack of volume growth keeps us away.

Result Highlights

Revenue growth of 11% in line with our estimate of Rs5.99bn; Suburban growth of 8% YoY with 14% margin

Gross margin rose 110bps YoY to ~80% on account of increased Swasthfit share which led to improvement in realization per patient

Persistent control over other expenses lead to better margin outcome at 28.2% vs estimate of 27.5%

PAT up 29% YoY on steady topline growth, higher other income, operating leverage along with lower interest cost YoY

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