Key highlights from MedPlus Health Services Ltd (MEDPLUS) Q4 FY22 Earnings Concall
Management Update:
- MEDPLUS said it opened 288 stores in 4Q, the largest quarterly store openings in the company’s history. The highest additions were in Tamil Nadu and Maharashtra of 65 and 60 respectively. MEDPLUS commented that it will continue to be aggressive on the store openings.
Q&A Highlights:
- Amey Chalke of Haitong Securities asked about the private label contribution outlook over the next 1-2 years. Gangadi Reddy MD replied that going forward MEDPLUS fully expects the private label uptake in smaller towns to be much higher and expect to grow the pharmacy side of private label by 0.5-1%. The other part will also grow significantly.
- Amey Chalke of Haitong Securities enquired how home delivery increase will impact margins. Gangadi Reddy MD answered that it won’t impact significantly because MEDPLUS charge a INR20 fee to customers for home delivery. And the company usually do it using its own drivers in a very small area.
- Anubhav Aggarwal from Credit Suisse asked about the split of other segment revenue of INR5 crores for 4Q22. Hemanth Kundavaram CFO replied that it combines the wholesale distribution and the revenue from opticals. Of this, Opticals was around INR1 crore.
- Aashita Jain with Edelweiss asked about the expected investment in the next two years on pathology and radiology. Gangadi Reddy MD replied that MEDPLUS is in a pilot mode and has not fully finalized the plan. MEDPLUS would be able to give the full details by at least next quarter.
- Aashita Jain with Edelweiss enquired about store addition guidance for the next 2-3 years. Gangadi Reddy MD answered that in this year, MEDPLUS will do more than 1,000. MEDPLUS ended March with over 100 net additions. The company doesn’t want to give guidance for years ahead.
- Avnish Khara of VT Capital enquired if the company expects the franchise model to pickup for the future growth in the next 2-3 years. Gangadi Reddy MD clarified that on the franchisee stores, MEDPLUS tried it several times, but didn’t get any great success as it’s such a price competitive market and the margins are low.
- Yusuf Gandhi asked if there are any specific geographies or regions where MEDPLUS is planning to expand for the next 1 year. Gangadi Reddy MD said the company is going in the 7 states in which it’s already there. And continue to open stores both in the Tier 1, Tier 2, Tier 3, and Tier 4, more weigh towards the Tier 2, Tier 3, and Tier 4 than Tier 1. MEDPLUS added that it might open a few in the neighboring states of possible Kerala, Chhattisgarh or Madhya Pradesh.
- Yusuf Gandhi asked if there is seasonality in MEDPLUS business in terms of quarters. Gangadi Reddy MD said it’s there a little bit. During monsoons, rainy and winter season there is bound to be more infections, more fever due to cold and cough etc.
- Saion Mukherjee with Nomura asked how mix and margin profile change as MEDPLUS goes to less dense areas. Gangadi Reddy MD said that definitely less dense areas end up buying a little less both in FMCG and medicines also. So the top line would be slightly lesser. MEDPLUS actually see that EBITDA margins in smaller towns are actually better than in the bigger cities.
- Anubhav Aggarwal from Credit Suisse asked about the average order value for MEDPLUS. Gangadi Reddy MD replied that average order value across segments is INR440.