Buy Thyrocare Technologies; target of Rs 750: Edelweiss
Edelweiss’ research report on Thyrocare Technologies
In Q4FY18, Thyrocare posted lowest top-line growth—11%—since IPO. This was due to the first-ever decline in Wellness, led by heightened competition, which we have been highlighting for the past six quarters. Despite Q4 being a seasonally strong quarter, rising share of regional PE-backed players, especially in Delhi, coupled with non-recurrence of promotional activity, led to the deceleration. EBITDA margin also fell to 38% from past three quarters’ run rate of 42%. The blip has prompted the company to undertake following changes in strategy: i) shift focus back to B2B; ii) spend 5% of sales on advertising; and iii) promote franchise model in imaging. Given the current macros, we believe successful implementation of this strategy is key.
Though we believe achieving the 25% FY19 revenue growth guidance will be challenging (our estimate 18%), we will wait and watch if the new strategy is successful on a favourable base. Maintain ‘BUY’ with TP of INR750.
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