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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:
recovery in volumes;
improvement in partnership business; and
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:
Also Read: Spandana – Embarking On Self-Sustainable Tech-Enabled Customer-Led Growth Journey: ICICI Securities
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