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MedPlus Health faces near-term struggles, long-term gains possible, says Nomura

08 Jul , 2024   By : Debdeep Gupta


MedPlus Health faces near-term struggles, long-term gains possible, says Nomura

Nomura has reduced its target price for MedPlus Health Services to Rs 931 from Rs 982 while reiterating its "Buy" rating. This adjustment comes in the wake of recent disruptions that have negatively impacted investor sentiment and the company's performance since its December 2021 listing. MedPlus shares have seen a 16 percent decline in their stock value since its IPO.


At 9.17 AM, MedPlus shares were flat at Rs 669.55. The new target price set by Nomura represents a 39 percent potential upside in MedPlus shares. The stock has fallen over 10 percent in the past six months while Nifty 50 has gained 13 percent during the same time frame.


MedPlus's operating EBITDA margin has fallen by 150 basis points between FY22 and FY24 primarily due to aggressive new store expansions, the company's entry into diagnostics, and the introduction of low-cost generics. While the new store revenue ramp-up has met expectations, the diagnostics business is currently near break-even and expansion plans are limited to Hyderabad.


Nomura said that the transition to low-cost generics and the rebranding of high-margin private labels have initially impacted revenue and gross profit by approximately 3.5 percent and 15 percent, respectively. However, the substantial increase in volumes has offset these impacts.


Nomura said that it anticipates a marginal reduction in current discounts which is likely to help improve the operating EBITDA.


Nomura's report suggests that, despite recent challenges, MedPlus Health is well-positioned to benefit from the ongoing shift in the pharmacy sector from unorganized to organized segments and the rising demand for low-cost generics.

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