Medplus Health Services Limited is second largest pharmacy retailer in India, in terms of (i) revenue from operations for the financial year 2021, and (ii) number of stores as of March 31, 2021, according to the Technopak Report. They offer a wide range of products, including (i) pharmaceutical and wellness products, including medicines, vitamins, medical devices and test kits, and (ii) fast-moving consumer goods, such as home and personal care products, including toiletries, baby care products, soaps and detergents, and sanitizers. Company was founded in 2006, with the vision to set up a trusted pharmacy retail brand by reducing inefficiencies in the supply chain using technology. Company has maintained a strong focus on scaling up the store network, having grown from operating the initial 48 stores in Hyderabad at the conception of the business to operating India's second largest pharmacy retail network of over 2,000 stores distributed across Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Odisha, West Bengal and Maharashtra, as of March 31, 2021. For the financial year 2021, its share of the organized pharmacy retail market, based on revenue from operations, in Chennai, Bangalore, Hyderabad and Kolkata stood at approximately 30%, 29%, 30% and 22%, respectively. The number of stores has grown since the conception of the business and, as of September 30, 2021, they operated 546 stores in Karnataka, 475 stores in Tamil Nadu, 474 stores in Telangana, 297 stores in Andhra Pradesh, 224 stores in West Bengal, 221 stores in Maharashtra and 89 stores in Odisha. Company employs a data analytics driven cluster-based approach to the store network expansion, whereby they first achieve high store density in a densely-populated residential area within a target city before expanding the store network in the surrounding areas within that city, followed by expansion into other adjacent cities. Its cluster-based approach to store network expansion is also driven by the understanding of the catchment demographics, market dynamics, and the ability to support store expansion with back-end infrastructure, such as warehouses and distribution centres. They believe that this approach and understanding allow them to (i) create brand visibility within the cities where they operate, through focused implementation of marketing and advertising initiatives, (ii) increase the market share in the cities where they operate, (iii) replicate the growth model in adjacent under- served cities and towns, as they develop the presence in those clusters, and (iv) generate cost efficiencies due to operating leverage achieved in the supply chain and inventory management. They have a streamlined and methodical store opening process, and dedicated operations and business development teams at the area, city and state levels that would vet and approve the opening of new stores. Company's omni-channel platform enables them to service the customers through the stores as well as the online channels, thereby enabling them to leverage the strong offline channel to establish and grow the online presence. Company's "click and pick" service allows customers to place orders directly online for collection at their preferred store at a convenient time. The customers also have the option to return any items purchased through the online channel at their preferred stores, subject to the standard terms and conditions. Through its "door-to-door" delivery service, in the cities of Hyderabad and Bangalore, the customers can place orders over the telephone, through the website or the mobile application. As of March 31, 2021 and September 30, 2021, approximately 8.98% and 8.44% of the revenue from operations was attributed to online sales, respectively. As per financial performance, MHSL has posted total income/net profits of Rs 2,284.98 Cr / Rs 11.92 Cr (FY19), Rs 2,887.78 Cr / Rs 1.79 Cr (FY20), Rs 3090.81 Cr / Rs 63.11 Cr (FY21) Rs 1,890.89 Cr / 66.36 Cr (H1FY22). So Company has posted very good growth over last couple of years .They have posted an average EPS of Rs. 3.15 and average RoNW of 5.19% for last 3 fiscals. Issue is priced at a P/BV of 11.11 as per NAV of 71.67 on 30.06.21.If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 141.91 and if we annualise FY22 earnings, P/E is 67.47, which looks fully priced. As per RHP, there are no listed peers. On BRLM's front, 4 lead managers are associated with this IPO, and have handled around 66 IPOs in last three fiscals. From last ten IPOs, three are opened below issue price and remaining are opened above issue on the day of listing. As of now, five are trading below issue price and other are trading above issue price. ( As on 07.12.21) As per financials, MHSL has shown good growth over last couple of years, RoNW is 8.74% and P/E is respectively 142 and 67 as per FY21 and annualised FY22 earnings. Company is in healthcare sector and second largest pharmacy retailer in BHARAT. As healthcare facilities are improving and increase in online pharmacy will help this sector to grow at good rate. But, it's highly competitive segment with local players and very low entry bearers. Performance of BRLM is average. So, we are giving SUBSCRIBE rating to this IPO.
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