Recently thought of going for a precautionary checkup and decided to try Thyrocare. Chose a package that included several blood tests (Sugar, Vitamin B-12 etc), charges of around 2500. From the point of booking the appointment, scheduling, the technician’s visit and finally getting the report was a smooth affair. Everything happened with clock’s precision. Very impressed with the experience.
Disc: Not invested but interested.Find the stock fully priced at CMP.
Yes too i did a blood test last month. Service was excellent. I also came to know that we can get a tax benefit for that amount in Section 80D. I submitted the bills for tax benefit “Under Preventive health Check up Section 80D”.
Disc: Invested.
Recent decision of Delhi government could be bad news for companies like Thyrocare and Dr. Lal Path labs
Good discussion on this subject can be read here
Outcome of board meeting:
Dr Velumani takes Rs 1 as salary pm from the current 10L pm
Kudos to Dr. Velumani. Not just pay cut, he even gave away other stuff for just one rupee as a goodwill gesture.
Hats off…I would say!
I ve few friends from South who used to tell me his story of simple living high thinking , he is living up to his reputation . Disc: purchased during ipo but sold recently due to extreme valuations . Would like to enter at right price
Thyrocare seems to be better than Dr Lal in terms of growth and profitability. The gap will only widen in my view. Both stocks are very pricey!
Thyrocare Technologies – Redefining Healthcare
My notes on Thyrocare Technologies Ltd:
Why Thyrocare has higher margins than other players?
EBITA margins of ~41% vs 25-27%
1. Asset light model:
One central lab and 6 regional lab. Samples get air lifted to CPL for around Rs 5. Dr Lal has about 189 labs and Thyocare’s lab but for the CPL is all under rented lease model only.
2. Lower Employee Cost
A quick look at the Q1FY18 results tell that Thyrocare employee benefit cost is 8% versus 17% for Dr Lal. Thyrocare tends to recruit freshers maybe most of their operations are automated and thrust is given to technology. Dr Lal on the other hand recruits personnel, like in the IT industry, when they anticipate higher business going forward.
3. Focus on preventive and wellness tests
I myself am on Paleo diet and lifestyle and as there are more awareness about the same, preventive tests will be on the rise. It is repetitive, wider base (people sick will be much much lower than healthy individuals wants to test) and multiple tests per sample. I can vouch for this that as there is more awareness, people will take tests to know their body better with respect to certain parameters like Vit -D, testosterone, lipid profile, thyroid, HbA1C, etc.
4. No Government interference
Dr Lal does tests when Chikengunya, Dengue or swine flu, etc. breaks out. Government has tie up with them and they conduct tests which may be high volume but lower margins. Thyrocare doesn’t have to deal with this though it could be a good thing as operational leverage kicks in and hardly there is any incremental costs associated.
5. Cost conscious
Apart from the above, it seems Velumani is plain thrifty. Be it taking Re 1 salary, doing Rs 9999 PET-CT scan or low cost Sugar Scan he wants to get into business opportunities where he can bring down the cost and still be profitable.
Other than the above, this industry is a not capital intensive and throws out free cash. Equipment are not owned and provided by vendors, hub and spoke model where geographical expansion is possible with minimum capital outlay and economy of scale and operating leverage is achieved with large volume of samples tested.
Risks and Concerns
1. Commodity-like service/product
Do we tend to take tests with the cheaper price offered vendor? I don’t think so. Here trust, branding matters. I wanted to take a whole body check up with Thyrocare but my mom says “don’t take risk and go with Apollo only.” Dr Lal’s management has given a example of Boeing flight. Biman Bangladesh Airlines, Pakistan International Airlines, Emirates, Singapore Airlines all fly almost the same product but we tend to have preference.
Nonetheless this is a risk when many branded players vie for the same pie going forward.
2. Limited pricing power
Maybe due to the above point. Unlike businesses like Wonderla or Eicher who take price hikes regularly and yet manage to grow, diagnostics businesses can’t do the same.
Players have to resort to discounts like:
Diagnostics Industry - Tailwinds and opportunities
1. Preventive and wellness tests
As mentioned above this is a very interesting thing to playing out, IMO. As the awareness increases, preventive tests will also go up. Many people who follow the Paleo lifestyle do take wellness tests multiple times a year.
As awareness increases, we would have people not liking to spend on medicines (holistically speaking) or “normal” treatment. Further with drug price cap, generics prescription and medical devices (knee cap, stents, etc.) price cap, these businesses might not fetch the same kind of returns as in the past. TTL with its already low price (comparatively) is positioned well to take advantage.
2. Asset Light business
Got to love businesses which throws free cash. That cash is being used for scaling up for setting up RPLs and PET-CT scan centers. Need to monitor how the business of NHL is progressing.
There are other reasons like public healthcare spends is low, more stringent accreditation/regulation helping established players, improving medical insurance (annual free health check is now available for policies), income tax deductions, medical tourism potential, etc. which are covered in this thread and can be looked up in the RHP, corporate presentations and annual reports.
TTL has guided 25% growth along with 40% margins going forward and Rs 300 incremental revenue for the next 5 years.
Disc: Not invested in TTL or DLPL. I feel TTL is a good business, if not a great business. I do not know if investment can be made at these valuations. But am thinking as a portfolio strategy where I may replace my pharma businesses (partially or full) for diagnostics business.
Thyrocare charts indicate that it has been consolidating for sometime post its IPO at the 660-680 levels. It has retraced to roughly 50% levels where its been building a base. As mentioned by @drgrudge above its a 25% to 27% grower but the more interesting thing that despite its good growth its payout ratio is very very high and it has routinely paid out 75% to 90%. This indicates what we already know, that its needs very little capital to grow. In contrast , Dr Lal has a payout of 10-15% and its growth seems to have hit a wall lately.
As is the case with all companies connected to the health sector, growth rates are a key monitorable and Thy seems to be holding up just fine in this aspect.
Best
Bheeshma
Disc-Invested recently.
I happened to go to a local diagnostic center last Saturday and was amazed the amount of people who were waiting to get tests done at around 7AM. My mom has also told how crowded the Apollo Clinic is during weekends/holidays. These people charge a lot (be it a standalone local fellow or an Apollo) and yet people wait in queue after paying at least 20% more than what Thyrocare would charge.
For people who are skeptical (particularly my mom) that Thyrocare’s quality and test standards are not upto to the mark and thus they charge low, I’ve verified my test reports from Apollo and Thyrocare. There is hardly any difference in test results. 
Disc: I’m now invested in Thyrocare. Both fresh investments and some buy after selling some of my pharma holdings.
One of the issues the management needs to look in to is the undercutting by its own staff. The city where I live in is a T3 city with no Thyrocare center. Sometime back I booked a comprehensive health checkup online. I soon got a call from their Mumbai office and they fixed a visit from their area representative as per my convenience. This gentleman came and collected the blood and urine samples, and then asked why I was not going for the upgraded health checkup (which was costlier by Rs 600-700) than the one I had chosen. He told me that I could get the upgraded package by paying just Rs 300 more if I go through him.
What he suggested to me was that I cancel my appointment by calling them citing any reason. He will then make a new appointment for me with a slight change in my name /address. I was told that doing this will not only save me money, but also time, as the company will dispatch the report by courier from Mumbai that will take some time, while he will hand deliver the report to me much earlier.
This gentleman also claimed that he is serving many repeat clients, he also showed me many open reports that he was about to deliver.
Obviously I didn’t fall for his salesmanship, but I developed serious doubts about the company’s ethics and integrity.
I must say that apart from this dealing with Thyrocare was a pleasant experience. The report came on time and the results were in line with the report from Lalpathlab.
May be what I experienced was an isolated instance (just one back sheep), but it might also be a part of a large scam, who knows!
Why don’t you mail the company as you have all details and/or get in touch with Dr Velumani on twitter his handle is @velumania. He is quick to respond
I did not do this at that time though I should have brought this to company’s notice. Will do it now.
I wrote a detailed letter to Dr. Velumani earlier today and this is what he responded with:
"Thank you for your inputs.
It used to happen in 10% cases.
They used to cheat company for a 20% revenue.
But we have put in controls in place
Now it is 1/100
Thank you for your concerns and inputs.
We will investigate this too
Thank you again.
When you want next time for you, we will trap him.
Keep in touch
Dr velumani"
Must say I am very impressed with this man’s integrity and business acumen.
Glad it worked out well
I have heard Dr. Velumani speech. I must say he is no doubt an intelligent fanatic. Just waiting for right valuations to enter
Always interesting to hear him speak…
