Thyrocare - Stimulating Model To Restore Profitability: ICICI Securities

ICICI Securities Report

Discontinuation of the MCGM contract, and a portion of business from its parent API holdings, has slowed down revenue growth to ~8% in H1 FY24. Thyrocare Technologies Ltd.’s strategy of revising incentives for its franchisee partners is panning out well for the company.

Its residual business grew at ~20% in Q2 FY24, which is quite ahead of industry growth. We expect Thyrocare to register earnings compound annual growth rate of 24.7% over FY23-FY26E on a low base led by:

1. recovery in volumes;

2. improvement in partnership business; and

3. aggressive expansion.

We raise our 25E Ebitda by 4%. We expect the company to grow its revenue/Ebitda/profit after tax by 14%/21%/25% over FY23-26E and a 430 bps margin expansion to around 27% by FY26E.

Return on capital employed is expected to touch ~21.1% by FY26E with cumulative free cash flow generation of Rs 2.6 billion in FY24-26E.

The stock currently trades at valuations of 33 times FY25E and 26.5 times FY26E earnings and enterprise value/Ebitda multiple of 17.8 times FY25E and 14.8 times FY26E, respectively.

We raise our recommendation to 'Buy' (Add earlier) on the stock with a revised discounted cash flow-based target of Rs 740 (Rs 615 earlier), implying 32 times FY26E earnings and 18.1 times FY26E EV/Ebitda.

Key downside risk:

• Promoter has pledged its entire stake in the company, fresh competition may deteriorate pricing and profitability, delay in turnaround in imaging business.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.