Nureca - Online Distribution Of Home Healthcare Products

Company had a recent IPO in February 2021

WHAT DOES NURECA DO? https://www.nureca.com/

It caters to home healthcare sector.
· Chronic Device Products – blood pressure monitors, pulse oximeters, thermometers, nebulizers, self-monitoring glucose devices, humidifier and steamers.
· Orthopaedic Products – wheelchairs, walkers, lumbar and tailbone supports and physiotherapy electric massagers.
· Mother and Child Products – which includes products such as breast pumps, bottle sterilizers, bottle warmers, car seats and baby carry cots.
· Nutrition Supplements – which includes products such as fish oil, multivitamins, probiotics, botin, apple cider and vinegar.
· Lifestyle Products – which includes products such as smart scales, aroma diffusers and fitness tracker

The company has 3 brands Dr Trust, Dr Physio and Trumom under which it sells these products

STOCK TRADING HISTORY
· IPO happened at Rs400/share in February 2021.
· It listed at Rs634.95/share on February 25, 2021
· Today it is at Rs1610

FINANCIALS AVAILABLE
· FY20 : Revenues of Rs99.4crs and Profits of Rs6.4crs
· 1HFY21 : Revenues of Rs122.1crs and Profits of 36.2crs
· If you extrapolate 1HFY21 profits to 2HFY21 one is looking Rs72crs profits. At current market capitalization of Rs1614crs its trading at 22x FY21 P/E

AUDITOR: BSR & Co LLP who is considered decent

BUSINESS ANALYSIS

Outsourced manufacturing
· Company gets all its products from 3rd parties. Generally, does not have long-term contracts with vendors committing them to supply products.
· For oximeter, thermometer, nebulizer, rehabilitation products and blood glucose monitoring device company has a single-source finished goods vendor.
· Until recently, company used to get products from few local vendors under own brand name.
· Presently, they majorly outsource the manufacturing of products to certain foreign vendors and as well as certain vendors in India under our own brand name.

Distribution channel
· 95% of sales is online. Has recently tied up with Chroma also for offline sales
· Dependent on limited number of our channel partners such as 3rd party e-commerce players, distributors and retailers for a substantial portion of our revenues.

You can see product listing here

https://www.amazon.in/s?k=dr+trust+oximeter+digital&rh=n%3A1350384031%2Cp_89%3ADr+Trust&dc&crid=2AAZ1HL1JSHHO&qid=1620707977&rnid=3837712031&sprefix=dr+trust%2Caps%2C637&ref=sr_nr_p_89_1

https://www.google.com/search?q=dr.+trust&sxsrf=ALeKk007otPw9HiJOKBJgy8SaBI8iwYfBA%3A1620708067940&source=hp&ei=4wqaYO2KN5GU4-EPn625wAc&iflsig=AINFCbYAAAAAYJoY84jP77B7TrvZLAk3vqRFKBygDImg&oq=dr.+trust&gs_lcp=Cgdnd3Mtd2l6EAwyAggAMgIIADICCAAyAggAMgIIADICCAAyAggAMgIIADICCAAyAggAUOUGWOUGYI0caAFwAHgAgAF9iAF9kgEDMC4xmAEAoAECoAEBqgEHZ3dzLXdpeg&sclient=gws-wiz&ved=0ahUKEwitiLCF6MDwAhURyjgGHZ9WDngQ4dUDCAs

Promoter
· Hold a 70% stake in the company post IPO
· Promoter is Saurabh Goyal and his family
· Saurabh Goyal worked for 10 years in Nectar Lifesciences in India for 10 years before he started building this company Nureca in 2015

Key current investors in the company:
Quant Mutual Fund (1.63%), Abbakus (2.38%) which is a PMS started by ex-CIO of Reliance Mutual Fund Sunil Singhania, Next Orbit Venture Fund (4.08%)

Personal experience in using products
I had purchased a pulse oximeter and a thermometer of this company in the first half of 2020. Still working well

Financials

IPO Prospectus: Listing

Others

Downside Risks

  1. Depend on 3rd parties to manufacture our products. If these organizations are unable or unwilling to manufacture products, or if these organizations fail to comply with FDA or other applicable regulations or otherwise fail to meet our requirements, business will be harmed.
  2. Depend heavily on channel partners such as third party e-commerce players, distributors and retailers and failure to manage the distribution network efficiently will adversely affect performance.
  3. Availability of look-alikes, counterfeit healthcare devices, primarily in domestic market, manufactured by other companies and passed off as Nureca’s products.
  4. Intense competition and may not be able to keep pace with the rapid technological changes

Disclosure: Invested

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Pursuant to Regulations 29, 30, 33 and other applicable Regulations of
Securities and Exchange Board of India (SEBJ), (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (LODR Regulations), we wish to
inform you that meeting of Board of Directors of the company will be held on
June 16, 2021 to consider and approve, inter alia amongst items:

  1. The Audited Financial Results for the Financial Year 2020-21, Financial
    Statements of the Company for the Financial Year 2020-21 and matters
    related thereto.
  2. Recommendation of Final Dividend to the Members of the company for
    . Financial Year 2020-21

Profits in 2H were below my expectations but still very decent.

  1. As per government policy, some of the key products have come under drug license, and sales were impacted until license were obtained, leading to an impact in Q4FY21 revenue
  2. Lower EBITDA margins in Q3, Q4 as compared to Q1, Q2 are due to:
  • Higher gross margin in Q1, Q2 due to covid surge
  • Higher Advertisement cost in Q3, Q4 (festival sales accounted for in H1)
  • Increase in freight and manpower cost.
  1. Due to Covid and festival sales the realisation was higher in H1 as compared to H2

Wonder if 2nd wave could positively boost 1Q22 results
Product Pipeline:
o SKUs launched till FY21 – 142
o Pipeline for FY22 – 60 plus

For the last several days I have been trying to dig value in this exuberant market. Felt Nureca has value. When I was skimming the surface am left with several questions. They have 102 design patents, when I saw the products, my 1st impression is they were commodity healthcare electronics. Did not find difference in Pule Oxymeter with other vendors other than the brand name, bluetooth bp monitor, glucose meter etc.
Market has positively responded to this IPO, stock price moved up in secondary market as well. Have come to the conclusion that I must be missing something. Appreciate if anybody can help me understand moat and entry barriers

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The government on Tuesday capped the trade margins of five critical medical devices such as oximeter and digital thermometer, used extensively in the treatment and prevention of Covid-19, at 70 per cent in order to bring down prices. The National Pharmaceuticals Pricing Authority (NPPA) has invoked extraordinary powers under the Paragraph 19 of DPCO, 2013, to put a cap on trade margin of five medical devices – oximeter, glucometer, BP monitor, nebulizer and digital thermometer.

"NPPA …

Read more at:

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My understanding is company’s 1H20 numbers might have been strong due to sale of pulse oximeters. Again 1QFY22 results should strong because of the 2nd wave. Unfortunately my efforts to figure out how much % of sales from pulse oximeters was to no avail.

If you see amazon and flipkart you will selling price of pulse oximeter now is at 50% discount to what it was in the 1st and 2nd wave.

Disclosure: Since I couldnt take a call on steady state numbers I have exited the stock!

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Company has announced Excellent Q1-22 numbers. How much can they sustain is the question?

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Morepen’s Diagnostics devices vertical makes similar line of products. Instead of outsourcing, Morepen has manufacturing facilities for making these products. Also declared a capex plan of 100 Cr for diagnostics devices. They have seperated this vertical as a seperate subsidiary to unlock its potential.
In comparison to Morepen, I do not see an upperhand for Nureca.
Invested in Morepen.

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but in terms of quality Dr trust is much ahead, it’s premiumization policy although they out source spare parts & assemble it not having a own manufacturing but will track whether management intend to make own FDA approved plant in future, Disc- not invested

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Have skimmed over the top about the company and their products. While the anti-thesis regarding high competition from un-branded players and no product differentiation stand tall, I see immense potential if the management is able to build an ecosystem around their products. For e.g. There is a family of 5. The father uses Dr. Trust’s Blood Pressure Monitor and Glucose Monitor. The mother uses Dr. Physio’s Massagers and Posture Correctors. The husband is into fitness and uses Nureca’s Connected Devices such as Fitness Tracker & ECG. The wife and baby might use their Baby Feeding pump or Bottle Warmers & Steamers. What Nureca can do here is build an integrated app/platform where the supposedly head of the family can track all this and maybe add in their family doctor to keep a check. Nureca already mentions that they analyze various data points from their products, and these can be used towards automating various in-app processes such as suggestions etc. I am thinking it can move towards the business of HealthifyMe but targeting a larger audience. All these depends on what management’s vision is.

Disc: not invested, only researching

why do they make most of their money in only one quarter and the rest of the quarter they make negligible earnings?

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