Key takeaways of the call

Patient volume for FY17 it grew by 10.5% to 13.3 million up from 12 million in FY16. Number of tests per patients is growing at a faster rate than number of patients in FY17. Number of samples for FY17 stood at 29.3 million up from about 26.3 million. Patient volume growth for the quarter ended March 2017 was 7.7%.

Operating Revenue increased by 11.2% in Q4FY17 to Rs 219.9 crore and the normalised EBITDA increased by 1.8% to Rs53.8 crore. The normalized EBITDA margin for the quarter was lower at 24.5% compared to 26.7% in Q4 FY16. The PAT was down by 10.1% to Rs 31.16 crore. Lower PAT for the quarter is mainly on account of the impact of ESOP reversals in Q4FY16. Full year PAT increased from Rs 1332 million to Rs 1552 million an increase of 16.5%. The PAT numbers are not strictly comparable for Q4 as previous year had an ESOP reversal of Rs 35 million in Q4.

Full year FY17 revenue grew at 15.3% to Rs 912.4 crore and the PAT was up by 16.5% to Rs 155.19 crore.

The company continues to focus on quality service, accessibility and affordability to the customers. Lab serves two purpose i.e. capacity to test and capacity to collect samples. While sample collection can be franchised out to cut costs, the company is franchising collection centre under asset light model. The company continues to invest in infra and people. Kolkata reference lab that will be ready as per schedule in Oct/Nov 2017 will enhance the capacity to test in Eastern region. It has also added about 70 new satellite labs. The company has catalogued about 100 new tests.

Effects of demonetization subsidized operations come to normal. The company has lost about 9-10% of revenue in Q3FY17 due to demonetization. If we annualize that for the year the impact of demonetization will be about 2-3% for FY17.

Average realization has increased to Rs 688 per patient in FY17 from about Rs 660 in FY16.

Higher competitive intensity on the B2B and pick-up component of the operation resulted in impact on pricing. The B2B segment consisting of hospitals and private labs is facing increased pricing pressure as everybody wanted to grow faster. Countering this is largely through manpower productivity improvement. Competitive pricing pressure is affecting the profitability.

The company has B2C as well as B2B segment. The company wants to drive lab management contract in Hospitals.

Cost structure –The company have increased the head count by 300 people in FY17 in both existing labs/process and new labs. This has led to increase in fixed cost. But material cost is variable and linked to tests.

Less than 1% of the labs across the country are accredited. About 29 labs of the company are currently accredited i.e. NABL.

The company operates in mid price point with hospitals operating at top end and unorganized player at bottom.

Revenue mix – about 72% continue to come from north, 12% from east, 13-14% is from both south and west. The patient is more in south and west as the realization is much lower in this region.

Growth in range of 20% in value terms is bit difficult at current circumstances. The goal of the company is grow at the market rate even though not better. The market is growing at the rate of about 15%. Anything about 25% is a steady stable margin for the company.

Hepatitis test realization per patient has come down sharply in the last 2 years even though the patients numbers gone up.

Number of test per patient in case of Dengue is much higher than chickengunia.