Shares of Medplus Health Services Ltd. experienced a significant downturn on Wednesday, tumbling 17.80% to hit a new 52-week low of Rs 653.80. This sharp decline followed the company's announcement of weaker-than-expected financial results for the first quarter of fiscal year 2027.
Nomura's Q1 FY27 Analysis and Outlook
Global brokerage firm Nomura, while acknowledging the weak Q1 FY27 performance, has maintained its 'Buy' rating on Medplus Health Services, setting an unchanged 12-month target price of Rs 1,190. Nomura's analysis highlighted several key areas contributing to the quarter's tepid outcome.
Despite revenue growth of 22% year-over-year (YoY) and 1% quarter-on-quarter (QoQ), which was in line with Nomura's estimates, the company's gross profit growth was the slowest in four years, increasing by only 14% YoY. This was primarily attributed to a 163 basis points (bps) decline in gross margin, largely due to a muted 2% YoY growth in the pharma private label segment.
Overhead expenses also saw a considerable increase. Pharmacy salaries rose 30% YoY (14% on a per-pharmacy basis), and non-pharmacy overheads climbed 34% YoY, likely linked to recent store network expansions. Consequently, operating EBITDA declined 11% YoY, falling 29% below Nomura's forecast, and net profit saw a 22% YoY reduction, missing estimates by 34%.
Segmental Performance and Store Expansion
Digging deeper into segmental performance, branded pharma, branded non-pharma, and private label non-pharma segments recorded YoY growth of 20%, 17%, and 30%, respectively. Own pharmacy (Company-owned, company-operated – COCO) growth stood at 18% YoY, while franchisee sales surged by an impressive 164%, now contributing 5.4% to pharmacy revenue, up from 2.5% in Q1 FY26. The diagnostic segment also showed strong growth at 22.4% YoY.
Medplus added 146 stores during the quarter, predominantly through its franchisee model. The company's total network now comprises 5,476 stores, with approximately 12% being franchisee-operated. Mature pharmacies, defined as those operational before FY24 or over three years old, posted a robust 12% growth YoY, outpacing broader market expansion.
Strategic Capex Plans Approved
In other developments, Medplus's Board has approved significant capital expenditure plans. The company intends to establish a food park, including a cold press oil extraction unit, in Hyderabad, with an estimated investment of Rs 40 crore. Additionally, a concierge health and wellness services facility, also in Hyderabad, has been approved, projected to cost around Rs 115 crore, comprising approximately Rs 90 crore in capex.