Thyrocare : Debt free Asset Light Healthcare Play

If your comparing the two, it seems that Dr Lal wins on most the financial metrics, probably some of this is what’s tipping the scale to favor Dr Lal:


Thyrocare down by 20% in last one year , went public in 2016 & currently trading below the listing price even after 2.5 Years.
Slowdown in business compelled the company to increase spend on advertising and switching to a B2B model due to high customer acquisition cost in B2C Model.
Competition from private equity backed players has also posed a risk to growth due to their strategy of bringing down the pricing of the diagnostic tests.

Disc: Invested


it’s growing at 15-18% and generates 60-70 cr of free cash flow …business doesn’t require too much capex for expansion and long run way if convertion from unorganized / standalone labs to organized labs actually takes place.

I think it’s not a bad buy at this price point compared to some of the other plays.

Let’s see when metropolis IPO comes and when does SRL gets demerged from Fortis .

Disc - Invested and thinking of adding if it falls more from here


Yesterday , booked for test in Chennai (Saturday) . The website needs lot of improvements and complete revamp… Its not user friendly at all.

For some reason , 2 bookings is showing up one without payment and another with payment. The payment details are not showing up while I received confirmation mail :smile:

No call from anyone received till now is a bit surprising… I will update once the complete process is over.

Until now the experience has not been so great. Considering that there are 100s of lab surround each locality, there must be some unique proportion needed for some one to come and avail these packages.

Samples collected by technician on time today. Awaited results…

22-Jan-2019: Report has been uploaded in the website. For some reason , I didnt receive it in email.

Overall report has been elaborate and looks fine…

Disclosure: Not investing just wanted to see how the model works…

Moderators : please feel free to delete this post in case its not adhering to the rules.


Agree on the website issues. It really requires improvement. Their phone customer support is pretty good. Service levels here in Pune from collection to report are pretty high quality. Pune is pretty close to their main facility in Mumbai by the way. I also find their profile diagnosis to be pretty reliable. Nothing to complain here.

BTW, customer support offered me a 20% loyalty discount for having availed the service previously.

Disc: Not invested but interested.

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Posting my response to a query with respect to low entry barriers and intense competition for Thyrocare raised in my portfolio thread.

I had a blood test on 17 January and I received the report by email today 19 Jan. Aarogyam 5 profile - cost Rs 2000. I also agree that Thyrocare website is not very useful in booking a blood test and I had to phone the local Thyrocare lab to organise home collection. The process was smooth and I have no issues. Blood results are as expected (no anaemia, other blood counts ok, no sugar or lipid issues, liver, kidney and thyroid function normal). ButI am B12 deficient being a vegetarian- so got treated with B12 1 mg IM injection today!

My mother had a similar profile in a different local lab - cost was Rs 3400. Thyrocare was not able to offer home collection since she was living 10 km away from their lab and hence they said they can’t do home collection.

My feeling is that there is a huge opportunity in this space despite competition. Thyrocare is the cheapest and yet second to none in terms of quality…

Disc - Thyrocare shareholder since IPO and adding regularly
Currently 15% of portfolio

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Competition will only help growth , as stand alone labs will be the first one to face the heat as after point it may become unviable business proposition for stand alone labs due to cost/pricing pressure so they may become collection center of organized players.
I guess ( have read somewhere ) that organized players are still less then 20 percent of market share so remaining 80 percent is all stand alone labs which may face the heat due to hyper competition .

Let’s see how things pans out over next 1-2-3 years .
Current PE run players like metropolis etc will come under share holders scrutiny once they gets listed so that may ease a bit of price competition between organized/listed players.

But I still do not understand why Thyrocare is selling at such a huge discount to Dr Lal path lab ?

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because of difference in their business model but it doesn’t matter both are overvalued in my view. How will you justify 30+ PE for an 10-15% growing business.

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Growth and all are futuristic thing which depends on N number of factor but For Sure thyrocare is the cheapest diagnostic company why I am saying this : Yesterday i had to do Vitamin D3 , Vitamin B12 and Calcium Serium Test for my mother . I went to apollo diganostic , Silverline(Local In Bangalore) and Few Others average cost of doing the same test was Rs 2900 - 3100 but thyrocare was doing at Rs 2000 and they also suggested if i go with there package of 2000 with all the above 72 more test they can do in same amount …

I agree. At 28 PE Thyrocare’s PEG is 2.50 which is higher than Dr.Lal path’s PEG 1.89

One compares.

My expectation is to get 15% return on my investment in mid caps and 12% for large caps.

In case of Thyrocare, it has

PE 28.24
YoY EPS Growth estimate: 13%

This will take 12 years to reach my earning power of 15%. This is a little difficult for me to process, being a minority investor in a company with not so proven management. More so when I compare it with other companies of a similar calibre but at a lower PE. For ex. look at Skipper ltd.

PE 9.40
YoY EPS Growth estimate: 12%

This will take 3 years to reach my expectation of 15% return for my invested capital at CMP.

Just sharing my perspective.


Better not to compare cyclical businesses ( Skipper ) with non cyclical ( diagnostic labs )
As one goes through cycle and duration of which is any ones guess while others are steady and don’t go through cycles.
Also capital requirement / return ratio etc all matters so if all these gets factored in , in that case you might not find such a huge difference in valuation of both.

Disc. Invested and biased

Skipper is not really cyclical. It makes power distribution infrastructure, which India will incessantly need in the coming decade or even more. Its sales figures say so.

Skipper Ltd.

Nonetheless, the idea was to show concern about buying companies of mediocre managements at high PEs. I like Thyrocare, I have posted positive things about it. But, I will wait for a much lower price tag.

The way I understand this business is thyrocare have very little moat, if any. For basic sugar and blood pressure testing, every Pharmacy can do this. For advanced tests, people prefer to use hospitals as every big hospital now has all testing equipment and they provide this in a nice package such as master check-up. So who end up using this is people who visit small hospitals and then do blood tests in any diagnostic centre they can find just for the sake of doing it. Home testing in itself, I do not find this to be a moat as any new entrant can do this. I do not find any entry barriers in this business as well. So for any business with such high return metrics, it is inevitable that competition enters to the point that the business is commodified and margins become poor. Therefore, I fail to see an upside from here for this stock.


Dr Velumani’s salary is Rs 12 per year. Compare that with Dr Lal management.

He is treating minority shareholders equally - recent on-market buy back shows just that (he did not take part in the buy-back)

Entry barrier - already there are 100,000 labs through out the country! Organised players are slowly but surely winning this marathon…

Even when there is intense competition for the business, as is the case now, organised players are growing at a decent rate with high return on capital.

Valuation is in the high side. But will it become cheaper?? I don’t know. Market will eventually get it right.

Disc - very biased

When talking about entry barrier, what I mean is the disruption risk (or simply jio risk). What prevents a cash cow from entering the business and disrupting the sector. With such high return metrics, any large business would be interested in this sector unless there is a strong moat preventing them to enter which I fail to find in this business. What I find is kind of the opposite that the moat is very weak that no one is looking to choose the brand thyrocare to do diagnostics as they can do it anywhere they like. Maybe this is a very niche sector with limited growth opportunity and hence a cash cow will not be interested which anyway will be a negative to buy at this expensive valuation.


Please don’t think of Throcare as basic blood and thyroid test. The PET-CT they do is one of the lowest cost in Delhi / NCR. This is the segment which would bring in more revenue in the near future.
The cost of PET scan in any reputed hospitals ranges from 20k-25k whereas Thyrocare does it for 10k.

People are in no hurry to do that and they look for cheaper options since this is the diagnostics stage.

Disclaimer: Not invested but interested.


Anyone can enter but it is not easy to scale up to create long term value. Why? You have to have systems in place for orderly collection, transport and timely reporting of samples. Thyrocare and other leading players are well established and it is much easier for them to grow.

Apollo has entered and they do have expertise in this medical field. There is room for many more and doesn’t mean thyrocare will suffer (it will be the local labs with limited reach who will lose out)…

Also thyrocare is very focussed - biochemistry and few other blood tests (fully automated) and PET ct business. Very simple business to understand for me being in the medical field.

PET CT revenues are growing at 30% and EBITDA of 24% (approx) despite charging such low rates! They still have not got their business model right and Velumani is open about it.

They also have entered TB business - too small and may or may not contribute in the future…

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The only reason why someone would choose Thyrocare is because of the pricing, the discount it gives. I wonder how much runway this kind of a business has. A management does this because the competition is stiff, and survival is tough.

Must keep a close eye on the sales figures. So far so good

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