Buy Thyrocare Technologies; target of Rs 795: Prabhudas Lilladher

Prabhudas Lilladher’s research report on Thyrocare Technologies

Thyrocare’s sales, EBITDA and Adj. PAT grew 11%, 18% and 29% YoY respectively in Q4FY18. While sick care business revenue grew 27%, the revenues from preventive care declined by 11% YoY due to increased competition from unorganized players and reduced promotional costs. Management guided for increased focus on B-2-B business and maintained similar B-2-C growth by spending 4-5% of sales in advertisements in FY19E.

Outlook

We expect benefits of lower price and promotions to be realised with lag effect and may have a J-curve impact on EBITDA margins. We lower our earnings estimates by 18% in FY19E as well as expect the earnings growth to be slower in FY20 at 22%. This has led to reduction in TP to Rs795 (previously Rs967) at a target PER of 35x FY20E.

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