Copy pasted below is a comment posted on Moneycontrol Forum by a poster called Charlie Brown. He attended the AGM and his comments…Thank you Charlie Brown
AGM was truly honest …A velu is the most brutally honest MD that I can listen to. He has given a huge boost to Thyro in the Covid strategy. he say the growth will.be back to 25% CAGR for next 5 years. NCL investment is in dispute because partners were charging heavily to clients and not sharing the incomes and THRYO was bearing huge costs so by breaking the arrangement in a few centers in a few cities they will save massively on cost so margins will rise. on COVID margins he say pricing came down from 2000 to 800 and expect further falls but costs as B2B player are able to give them 40% margins so investors should.not worry if cost come down. his dream is to make PCR test 100 and scale to billions across all labs. pregnancy test have been discontinued as they were not profitable and scalable ans capacity was diverted to COVID. brick and mortar model with labs is.not the future. he pans to to home visit technicians via training and partnerships to cross 10000 technicians . he says 9 months revenue will be equal to Last years and 21_22 will.be a huge jump. expect 50% he says over 30% people are already exposed to COV the potential for thryo is unlimited . we have no capacity constraints . regional centres were planned at 40 but they could add ok only 10 in the past due to demand. now the demand is so huge that toh expansion of additional 15 centers is going to happen in one years. aslo he is going to add 4 main labs including Thane. one in delhi calcutta bangalore which will all be equal to Thane in next few years . all capital expense will be added to balance sheet but with no borrowings so hearing his optimistic outlook looks like market is going to really give thryo a thumbs up. all the bad press with MUMBAI Municipal hospitals has been fake. thryo has been given a certificate of appreciation by Mumbai and he says Thyro now is the largest COVID LAB in terms of tests done across india . from 200 pd they are doing 10000 per day
contrarian view :: what would happen if the COVID 19 reduce drastically (spanish flu is has gone out in 2 years ) … can thyro still be on growth track …
Covid was a temporary disruption/setback, now it has become an opportunity and it will not last very long…
The most significant strategic shift from my view point is that Dr V is going to focus on blood collections at home and he is going to invest on technicians who will collect blood samples from homes (thereby removing the middleman and the need for a collection centres) and there will be be a number of new regional labs which will process routine blood tests…
While we need to await split of COVID and non COVID revenue, 2-3 themes are playing out
Decentralization of the lab business to a multi location centralized model - so from 1 large reference lab, all the larger players have 2-3 more which means they will be able to gain significant share in the micro markets
The theme around shift from unorganized to organized has accelerated. Consumers understand the RTPCR platform and capability around it which smaller neighbourhood labs don’t have in general.
Thyrocare has an efficient cost structure so it can even play the backend game with the online aggregators.
All 3 diagnostics companies are at 88-90 P/E, is also because last quarter results were poor and that is also one of the reason for heightened P/E. most likely except Dr Lal path labs, the P/E may get moderated at 60-70 as the earnings improves.
Can anyone explain how is the employee cost so low, even being in B2b business and Metropolis also having a similar kind of business, despite Thyrocare charging less per test, how is it possible that the margins remain so high and employee cost is almost half of others? Even Lal path does approx 40% business B2b
and both competitors claim margins remain similar or more less higher. They are around 25-30%, while simply Thyrocare has 10% employee advantage. How?
The business model of Thyrocare and others are very different. Dr. Lal has several company owned customer facing touch points which leads to higher employee costs. Thyrocare procures samples from third party franchisees. Most of the employees are at the Central and Regional processing labs and not feet on street.
Second- Thyrocare employees freshers and trains them. This is good for the society and good for Thyrocare as well (lower salaries).
And in general, if you see Thyrocare has a low cost philosophy (you can compare the salaries of CEOs, board member sitting fees etc.) and therefore I am guessing that the salaries of employees at Thyrocare would be on the whole lower than Dr. Lal on a like to like basis.
You are right. But things will change a bit now as Thyrocare board has empowered Dr. Velumani to hire multiple positions at CXO level… CEO has already been filled recently.
I think this is not a very accurate statement. It talks about YoY growth of 34% for Q3FY21. For Q2FY21 also, they had similar growth. So it’s a continuation and not an acceleration
I had considered these factors before concluding growth is accelerating:
Q2 would certainly have had some pent up demand effect and spillover from lockdowns in Q1.
Q3 is traditionally the weakest quarter
Covid tests volumes fell from a peak of 7500 daily tests in Q2 to around 1500 in Q3
Covid tests prices also fell drastically
And, therefore, Q3 to Q2 isn’t really a like to like comparison…
On balance and after removing the possible one-off effects from growth in Q2, it does appear that the main non-covid business is accelerating much faster now.
Point 1, 3 and 4 are very valid points and I agree @rajput_delhi . Since they are talking of yoy growth of 34% it would mean 128 odd crs of revenue for Q3FY21 which would be lower than 145 odd crs for Q2FY21. So not sure on point 2. Btw, where did you get the 1500 daily COVID test number?
Higher employee cost - field force front cost for planned growth.
Highlights
PET scan biz reviving well - positive at operating profit level,
Multiple regional labs are coming online this and next quarter- to significantly reduce turn around time and scale ops
non covid tests both volume and value up YoY( low single digit) - even this being weaker quarter seasonally
Arogyam doing well( preventive wellness)
They were running show with heavy load on Navi Mumbai central lab, expect regional labs combined with regional field staff to scale operations. Sector tailwind and runway is quite long especially after covid. Consolidation for many small players which were hit in last 9 months - cases for all large players to gain mkt share.Nulcear biz is showing greenshoots. Mgmt has been constantly buying from open market regularly.
Expect margins to show improvement going forward and core business to further improve in volume and value. Although this quarter appears muted on bottomline - Q4 onwards should do well.
Topline revenue showing good growth, bottom-line/PAT is lower due to increase in employee cost and other expenses (I do not know the details of other expenses, so cant comment). Bottom-line should improve going forward…
Free cashflow is excellent - 40 crores from 140 crores revenue. 97 crores free cashflow so far this year. Assuming 43 crores free cashflow for Q4 (conservative estimate) - total free cashflow for the year 140 crores. 31-32 PE based on cash flow with good growth (I am not going to guesstimate the growth)
Discl - very biased, still accumulating and one amongst the top 100 shareholders
Thyrocare closest competetor is Dr lal… metropolis is recently listed…but in diagnostics ibfeel as of today Dr lal is a leader with thyrocare a different strategy and closely following. As you are a significant shareholder in diagnostic industry, wanted to know your thoughts on this industry for next 10-20 years in India…how do you see things shaping up…thoughts on gov regulations, hospital inhouse diagnostics, competition, expected growth rate and risks that you see…
Also why did you not chose to be with leader instead or a basket approach? Thanks
