THYROCARE - Thyrocare Technologies Limited Share Price

Thyrocare Technologies Limited's management provided an optimistic outlook during the earnings conference call held on April 23, 2025. They reported significant progress across various metrics, with consolidated revenue reaching INR 687 crores for FY '25, marking a robust 20% year-on-year growth. They achieved a revenue increase of 21% in Q4, driven primarily by their Pathology business, which saw pathology revenue growth of 21% for the year and 23% in the fourth quarter.

Key forward-looking points include:

1. Franchise Expansion: Management aims to add over 1,500 new franchise partners in FY '26, building on their existing network of 11,000+. This, alongside their selective acquisitions (like Polo Labs and Vimta), will enhance their footprint in North and South India.

2. Revenue Guidance: While management refrains from issuing precise forecasts, they project a cautious outlook for FY '26, aiming for mid-teen revenue growth. Management indicated that the growth might stabilize as they are already operating on a high base and expect competitive pricing pressures.

3. Quality Commitment: Thyrocare continues to focus on quality, having achieved 100% NABL accreditation across all labs, which supports their market position and drives confidence in their service offerings.

4. Cost Management and Margin: The normalized EBITDA margin for Q4 was reported at 35% and 31% for FY '25, with plans to maintain margins around this level moving forward. Management highlighted strong gross margins bolstered by operational efficiencies as a key to future performance.

5. Technology Investments: They plan to invest in new technology sectors, including allergy and genomics testing, which will further augment their comprehensive test menu currently at 1,000 tests.

6. Dividend Policy: The Board announced a final dividend of INR 21 per equity share, signaling strong cash generation with net operating cash flow of INR 191 crores, allowing for both dividends and strategic investments.

Overall, the management's focus on quality improvement, strategic expansions, and modest growth targets suggests a robust plan for sustained performance in the coming fiscal year.

Q1: Sir, I just have 2 to 3 questions. So one is, in this quarter, we paid an excess tax of INR11 crores, like the 54% is the tax rate. Can you give me a clarification on why did we pay the excess tax in this quarter?
Answer: This isn't excess tax but a deferred tax provision reversal from previous years. We had provisioned this due to NHL impairment, assuming it would be realized upon selling that investment. However, since NHL is performing well, we decided to reverse this provision, which led to the INR11 crores hit in the P&L. Excluding this, our PAT would have grown by 88%.

Q2: Now I understood it. And my doubt was with respect to the margins. This is probably in the past 2, 3 years, this quarter has recorded highest level margins, EBITDA margin. So what was the primary reason for the expansion of the EBITDA margin?
Answer: The margin expansion came from increased volumes, resulting in higher year-end discounts from vendors, contributing roughly 4% to our EBITDA margin. Additionally, we benefited from operating leverage; our expenses did not increase at the same rate as our revenue. Last year, significant provisions for receivables impacted margin, which we avoided this year.

Q3: And my last question is with respect to the FY '26 guidance. So can you give us some guidance with respect to revenue growth and volume growth?
Answer: We typically do not provide specific guidance, but I can mention a general expectation of mid-teens growth for revenue. Given our growth at 20% on a high base, we recognize taking a substantial share from unorganized players is important. Volume growth has been about 14%, aligned with revenue growth. We do not anticipate major price changes next year.

Q4: So 2, 3 questions from my end. So one is you did explain, Rahul, about the pricing and margin drivers which have happened this year. So if I were to further break it down, pathology segment, is 90% contribution, saw revenue growth of 22%. Even on a sequential basis, we've seen a huge margin expansion. Year-on-year, obviously, it is very large.
Answer: The revenue uplift in pathology came primarily from an improved mix of smaller partners yielding higher rates and the introduction of specialized tests. Our overall test menu has expanded from 300 to almost 1,000 tests, enhancing realization. The consistent revenue growth, now at 22% and margins up to 36%, reflects this successful strategy.

Q5: Any update on the PharmEasy merger, which media was speculating a few months ago?
Answer: There have been no discussions regarding a merger with PharmEasy. The speculation seems unfounded; our Board hasn't considered it necessary. It's been a few months, and if there was any significance, discussions would have likely occurred by now.

Q6: Sir, I wanted to understand the reason for the company to issue the parent company's ESOP and not Thyrocare. Any particular reason for this?
Answer: The ESOP issuance through the parent company, API, instead of Thyrocare, helps maintain equity on the subordinate level while providing group-wide benefits. This ensures parity across group entities. Thyrocare contributes about 10-11% to API's revenues, and the ESOPs are designed to incentivize all employees collectively without diluting Thyrocare's equity.

Q7: Sir, have we set aside any amount for acquisitions for FY '26?
Answer: We estimate around INR15-20 crores may be allocated for targeted acquisitions, focusing on specific geographies where we need to strengthen our presence. However, overall, we are more concentrated on expanding our organic growth rather than making large acquisitions this fiscal year.

Q8: Could you give the annual number of samples?
Answer: We processed around 25.3 million samples annually, with approximately 66 lakhs in the last quarter, reflecting a 15% growth year-on-year. This growth aligns with the increase in patient numbers we experienced.

Q9: Sir, if you could share a number on an annual basis, what would be specialized as a contribution versus routine?
Answer: We classify tests into Aarogyam (preventive) and non-Aarogyam (specific tests). Aarogyam accounts for about 35% of our business, with non-Aarogyam growing continuously, improving our margin leverage. Over time, specialization and mix enhancement have become key performance drivers.

Q10: Will we maintain the EBITDA margin around 31% on an annualized basis for FY '26?
Answer: Yes, our target is to maintain normalized EBITDA margins around 31%, with an expectation of certain seasonal variations based on our business cycles in Q3 and Q1 being slower. But overall, we aim to keep operational efficiency high and reinvest in growth.

This Q&A provides detailed insights into key discussions during the earnings call related to tax implications, margin expansion, guidance on future growth, as well as strategic considerations around acquisitions and operational metrics.