MedPlus Bets On Private Labels To Drive Profitability Over Next Two Years

MedPlus Health Services Ltd. aims to grow its Ebitda by at least 1.2% in the next 6–8 quarters, on account of private labels' increased contribution to the volumes, Managing Director and Chief Executive Officer Gangadi Madhukar Reddy said.

In the first half of the current financial year, MedPlus Health Services’ revenue from private label products rose 3.5% against that of H1FY24.

Overall, the firm’s revenue jumped nearly 12% to Rs 1,576.2 crore from Rs 1,408.59 crore in the year-ago period.

Reddy told NDTV Profit that the company aims to increase the volume contribution from private label products to 50% from the current 17%. “We expect that we'll continue to grow this (private label volume) by at least 1% every quarter. Whatever growth we have got is (due to) the early adopters. Now, the growth is going to be at a slightly muted level.”

Pointing out that the result would be better Ebitda margins, he explained, “It's around 1% every quarter or maybe slightly more. For a period of several quarters, I think we should be able to add a significant margin to the Ebitda just by changing the product mix.”

With an increase in its private label share by 1% sequentially, branded pharma share will decrease at the same levels for the company, the top executive noted.

“Every 1% typically adds around 15 basis points to the margin on the MRP side. So, I expect in a period of maybe 6–8 quarters, we should basically do that 8% and increase our overall Ebitda by at least 1–1.2%. So that's on the margin side if all of the things are held steady,” he added.

In the second quarter, the pharmacy retail chain's Ebitda margins expanded to 10.2% against 9% in the same quarter a year ago. Reddy remained confident of maintaining this growth trajectory.

“This is also a function of the overall gross margin. And that is not gonna come down anyway. So it's gonna remain steady. As I said, it can only go up over a period of time, albeit slowly, but I don't see any reason why it should actually come down,” he noted.

Shares of MedPlus Health Services closed 3.21% higher at Rs 696.90 apiece on the NSE on Wednesday. Meanwhile, the broader benchmark Nifty 50 fell 1.36% to close at 23,559.05.