Medplus Health Services Ltd.'s generic-medicine launch to become earning-accretive from the mid-term and volume gains in sales from this segment will nullify the impact of sales loss from private labels, Nomura Holdings Inc. has said.
The brokerage maintains a 'buy' rating and increased Medplus' target price to Rs 974 from Rs 952 in November, according to a note on Sunday. "Generic volumes will lower inventory value with positive cash-flow impact."
Medplus launched generic medicines at 60–80% discounts from June. MedPlus Advantage is a subscription plan, which provides drugs at a steep discount. It includes an annual subscription fee of Rs 49, which is a nominal introductory rate.
Nomura said a successful generic launch could add Rs 300 per share. It sees marginal impact on Medplus' Ebitda to 0–1.5%.
Medplus' diagnostic-business Ebitda to increase 20% by financial year 2027. Its foray into diagnostic business is likely to be value accretive, according to Nomura.
The health service provider intends to expand beyond Hyderabad in diagnostic business with tie-ups from corporates and insurance companies.
Nomura highlighted that scale is a particularly key in radiology. However, it's too early to assess the impact of such a move, but it needs to be gradual, in our view.
Nomura said the uncertainty around the success of new initiatives and negative impact on near-term earnings are the main concerns. "We think these are right strategic moves but need a gradual implementation for successful execution," it said. "This would allow course correction and also limit any adverse impact on earnings in the near term."
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