Buy Thyrocare Technologies, target price Rs 1310: HDFC Securities

HDFC Securities has buy call on Thyrocare Technologies with a target price of Rs 1310. The current market price of Thyrocare Technologies is Rs 1089.45. Time period given by analyst is six months when Thyrocare Technologies Ltd. price can reach defined target.

Thyrocare Technologies Ltd., incorporated in the year 2000, is a Mid Cap company (having a market cap of Rs 5758.02 Crore) operating in Hospitals & Allied Services sector.

Thyrocare Technologies Ltd. key Products/Revenue Segments include Diagnostics, Sale of services, Other Operating Revenue and Glucose Strips/Gluco Meter for the year ending 31-Mar-2021.


Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 191.40 Crore, up 9.28 % from last quarter Total Income of Rs 175.14 Crore and up 20.96 % from last year same quarter Total Income of Rs 158.24 Crore. Company reported net profit after tax of Rs 77.92 Crore in latest quarter.


Investment Rationale
The brokerage believes Thyrocare is on a strong footing on the back of steady recovery in core business, likely increase in B2C share, opening of regional labs and expansion of branded franchisee centres which would aid volume growth. API Holding’s technology and digital products will also bring necessary digital capabilities to Thyrocare’s business. Wider product/service offerings and inclusion of specialised test profiles would improve its realisations once it reaches scale. Structural tailwind around shift from unorganized business to organized players, potential consolidation, likely increase in preventive check-ups and sizeable scale would benefit large organized players like TTL. Revenue from Covid tests which has been a large proportion of revenues in FY21 and likely in FY22 (given the recent spread of Omnicron variant) may not recur in FY23/FY24 to the same extent and hence the revenue growth post FY22 may not be very exciting unless compensated by other initiatives/synergy benefits with PharmEasy. Over the medium term, there remains a possibility of TTL being merged into PharmEasy; however, the benefit to TTLs shareholders will depend on the stock price of PharmEasy (post listing) and the swap ratio. Considering the strong historic growth profile, well-established brand image and robust return ratios, the brokerage believes that there is a scope for re-rating of this stock.

Promoter/FII Holdings
Promoters held 71.22 per cent stake in the company as of 30-Sep-2021, while FIIs owned 12.1 per cent, DIIs 6.6 per cent.