Entero Healthcare Solutions Q1 FY27 earnings call

Entero Healthcare Solutions reported a robust Q1 FY27, with consolidated revenue growing 38.2% year-on-year to INR1,940 crores. On a like-for-like basis, growth was even stronger at 40% year-on-year. This top-line performance was accompanied by significant margin improvement, with EBITDA margin reaching 5% for the quarter, expanding 143 basis points year-on-year. The company achieved its full-year FY27 EBITDA margin guidance in the very first quarter, driven by scale-led procurement economies, a growing share of revenue from the MedTech business, and the deliberate exit from certain low-margin accounts.

Profit after tax (PAT) for the quarter stood at INR52 crores, marking a 72% year-on-year increase. PAT attributable to owners was INR38 crores, up 37% year-on-year. The company demonstrated strong capital efficiency, with Return on Capital Employed (ROCE) doubling year-on-year from 11.5% to 21.1%, and Return on Equity (ROE) moving from 9% to 20.4%. Net working capital days also improved to 61 days from 66 days a year ago, reflecting structural efficiency gains from ongoing initiatives.

Management reiterated its commitment to organic growth and consolidation, aiming for an organic revenue growth rate exceeding 20% over the medium term^⏳ (3-4 years). While the company remains open to opportunistic acquisitions, there were no new major acquisitions in Q1 FY27, with inorganic growth of 20.4% primarily stemming from the calendarization of acquisitions completed in the previous year. The focus for the current year is to consolidate and integrate existing operations, leveraging the established platform.

The MedTech segment continues to be a crucial structural lever for margin improvement. MedTech revenue is on track to organically cross INR1,000 crores in FY27. This segment carries higher gross and EBITDA margins compared to the core pharmaceutical distribution business. The company aims for a 20% growth rate in MedTech over the next 3-5 years, benefiting from less competition and a greater opportunity to play a commercial role in demand generation.

Entero Healthcare Solutions reaffirmed its FY27 guidance, targeting consolidated revenue growth of approximately 23% year-on-year (excluding new acquisitions) and an EBITDA margin of 5%. The company also expects an EBITDA to operating cash flow conversion of 50% for FY27. Management indicated that while the 5% EBITDA margin guidance is maintained for the full year, they might revise it upwards after the Q2 performance, given the strong Q1 results.

The company attributes its ability to grow faster than the Indian Pharmaceutical Market (IPM) to its unique value proposition. This includes offering a wide product range from over 3,000 manufacturers, high fill rates, and superior service levels enabled by technology, making it a one-stop-shop for customers. This creates a '2-way moat' by attracting both customers and manufacturers, leading to increased wallet share from existing customers and effective market share gains.