Thyrocare Technologies Ltd is a pan-India diagnostics chain with focus on preventive and wellness health offerings under the Aarogyam brand. The company has a pan India presence with 1,122 authorised service providers (ASPs), comprised of 878 Thyrocare Aggregators (TAGs) and 244 Thyrocare Service Providers (TSPs) spread across 483 cities and 27 states and 1 union territory. The company follows a hub and spoke business model with a fully automated central processing lab (CPL) in Navi Mumbai and 5 regional processing labs (RPL) across India. In terms of revenue, Wellness & Preventive Healthcare tests account for 50 % of the revenue of which thyroid tests account for 20 % and the balance 30 % are accounted by non-thyroid tests. The Indian Diagnostic Industry is a mega industry, which comprises of equipment manufacturers and pathology labs. In India’s healthcare industry, diagnostic services play the role of an information intermediary, providing useful information disease diagnosis. From FY12 to FY16, the industry grew at a CAGR of 16 % to Rs. 37,700 Cr. For the next three fiscal years, it is estimated that the Indian diagnostic industry will grow at a CAGR of 16 % to 18 % to reach Rs. 58,500 Cr to 61,600 Cr in FY18. The diagnostic industry in India can be classified into pathology testing services and imaging diagnostic services. Pathology testing or in-vitro diagnosis involves the collection of samples, in the form of blood, urine, stool, etc., and analysing them using laboratory equipment and technology to arrive at useful clinical information, to assist in treatment of diseases. It also includes testing of biochemistry, immunology haematology, urine analysis, molecular diagnosis and microbiology. Imaging diagnosis or radiology involves imaging procedures such as X-rays and ultrasounds, which help mark anatomical or physiological changes inside a patient’s body, to assist doctors to diagnose patient’s disease. The imaging diagnostic segment also includes more complex tests, such as CT scans and MRIs and highly specialised tests, such as PET-CT scans. Pathology testing is often preferred as a first line of diagnosis for a majority of diseases and, thus, it contributes to a major portion of the diagnostic industry. Given the high volumes of pathology testing conducted in India, pathology testing still accounts for more than half of the revenue of the Indian diagnostic industry, although the cost of imaging diagnostic services is often more expensive compared to pathology testing. The pathology business is highly scalable as blood samples can be shipped to a remote, centralised location to achieve economies of scale. In contrast, imaging business operators have to install diagnostic equipment close to the patient. Imaging services cannot be centralised and, as a result, are difficult to scale up. Diagnostic centres in India can be classified as hospital‐based, diagnostic chains and standalone centres. Standalone centres form the majority share of 48 % followed by hospital based 37 % centres, while diagnostic chains account for the balance 15 %. The absence of stringent regulations and low entry barriers has led to the evolution of standalone centres, while hospitals tend to have their own pathology labs. Within diagnostic chains, large pan‐India chains form 35 % to 40 % and regional chains form 60 % to 65 %. Specialized tests require expensive infrastructure, which has led to the formation of diagnostic chains in India. These follow the hub and spoke model and enables economies of scale. However, the fragmented nature of the industry indicates low pricing power for service providers in the near term. The key drivers for the industry are increase in evidence based treatments, huge demand-supply gap, increase in health insurance coverage, need for greater health coverage as population and life expectancy increase, rising income levels making quality healthcare services affordable, and growing demand for lifestyle related diseases & healthcare services. This growth is likely to be supported by rising awareness towards wellness and a higher tendency among the population to take preventive actions against diseases. Changing lifestyle is perpetuating higher chronic diseases and with rising income levels, demand for diagnostic testing in India is on the rise. Further, the health insurance penetration level in India is currently low with 17 % of the population availing to it. Moreover, 86 % of the healthcare related expenses are borne directly by consumers in case of private healthcare services. Increase in penetration levels of health insurance is expected to indirectly increase demand for diagnostic services. Of the diagnostic market large pan-India chains account for 35 % to 40 % and regional chains cover the balance 60 % to 65 %. Also, they can eat into unorganised sectors market share which stands at 48 %. This leaves a lot of room for organised players like Dr Lal Pathlabs, Thyocare and SRL amongst others to grow faster than the industry. Thyrocare is one of the leading pan‐India diagnostic chains and offers 192 tests and 54 profiles of tests to detect health disorders such as thyroid, growth, metabolism, auto‐immunity, diabetes, anaemia, cardiovascular, infertility, and various infectious diseases. It offers various diagnostic tests under brand names Thyrocare, Aarogyam, Neuclear. It processes more than 10mn blood samples and conducts more than 53mn test annually. Thyrocare started its diagnostic services with low‐value thyroid tests in the year 2000, it is now the fastest growing and has the highest value‐added service offering in the segment of wellness and preventive care, which accounts for 51 % of its diagnostic revenues. Thyrocare is the industry leader in terms of revenue share from wellness and preventive care tests. Incidentally, CRISIL estimates this segment to deliver 25 % CAGR over FY15‐18, higher than the overall diagnostic industry CAGR of 17 %. With the setting up of regional processing laboratories (RPLs) in 2014 as against its only central processing lab in Navi Mumbai, Thyrocare delivered 27 % CAGR in its diagnostic test volume over FY14‐16. Recently, it has set up two RPLs in Kolkata and Bhopal and plans to set‐up 20‐25 RPLs at a capex of Rs. 75 Cr over next two years; this, is supported by a conducive industry scenario will drive growth. Additionally, the visible ramp‐up in its PET‐CT scan services in cancer diagnosis will provide meaningful incremental earnings growth. Thyroid profile is one of the key test offerings of the company and includes total Triiodothyronine, total Thyroxine and thyroid stimulating hormone tests which are collectively referred to as thyroid tests. Thyroid tests comprised 28 % of the total samples that the company processed in FY15 and generated revenue of Rs. 27.2 crore, which constituted 15 % of its total standalone revenue for FY15. They charge Rs. 780 per test Dr lal charges 650. Despite facing disruptive pricing strategy by its rival, Thyrocare is a leader of the domestic diagnostic industry in terms of profitability with an EBITDA margin of 40.7 % in 9MFY16. It is expected that it will maintain its margin leadership with continuous focus on wellness and preventive health‐care tests. Considering strong growth momentum and margin leadership, Thyrocare can post revenue CAGR of 25 % and PAT CAGR of 29 % over FY15‐18. Thyocare has posted a CAGR of 23.0 % over FY2011-2015. Going forward, given the cash rich balance sheet of the company, it can easily grow at 30 % over the medium term.
|SALES (₹ Crs)||183.00||241.00||302.00||387.00|
|NET PROFIT (₹ Cr)||47.00||52.00||75.00||101.00|
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