Medplus Health

Medplus Health Services reported a consolidated revenue of ₹15,614 million for Q3 FY25, marking an 8.3% year-on-year growth. However, the company experienced a slight degrowth of 0.9% quarter-on-quarter. Consolidated operating EBITDA stood at ₹799 million, representing a 5.1% margin. Pharmacy operations contributed approximately 99% of the revenue, growing 12.3% YoY on a GMV basis and 7.9% YoY on a net basis, with an operating EBITDA margin of 5.1%.

During Q3 FY25, Medplus opened 87 new stores and closed 27, resulting in a net addition of 60 stores. This brings the year-to-date net additions to 205 stores, with a target of 300 net store additions for the full financial year. The company's network has grown to 4,612 stores, covering over 2.4 million square feet. Management noted that approximately 55% of stores opened between January and June 2024 achieved breakeven within 6 months, and the entire cohort reached breakeven within this timeframe. For stores older than 12 months, the store-level EBITDA margin was 11%.

Private label sales constituted 19.6% of total revenue in Q3 FY25, with the private label pharma share reaching 17.7% of total GMV, up from 7.9% in Q1 FY24. Management aims for private label contribution to grow by approximately 1% per quarter on an MRP basis, which is expected to add 15-20 basis points to the gross margin. The company plans to increase its private label product coverage from the current 68% of overall medicines to 75-77%, targeting categories like insulins and other branded products.

The Diagnostics segment demonstrated a significant turnaround in Q3 FY25. Revenue grew to ₹274.7 million, a substantial increase from ₹196 million in the same quarter last year. More notably, the segment achieved an operating EBITDA of ₹22.1 million, representing an 8.1% margin, compared to a loss of ₹34.1 million in Q3 last year. This positive shift highlights the segment's improved operational efficiency and profitability.

Medplus is strategically strengthening its back-end operations and infrastructure to support long-term scalability. The company added four new warehouses in Q3 and plans to add 3-4 more, totaling 10 smaller warehouses (30,000-50,000 sq ft leases) in locations like Hubli, Madurai, Agra, Vijayawada, Vizag, Kapai, Nagpur, Raipur, and Indore. These initiatives are aimed at improving supply to existing stores and facilitating faster new store launches, particularly in newer states and deeper into regions like Madhya Pradesh.

The average discount on private label products is around 50-51%, with most higher-selling drugs falling within this range. Management does not anticipate significantly reducing this discount in the near term. For the rest of the business, the blended discount rate is estimated to be around 17-18%. The company sets private label prices based on the average of the top 2 or leading brand products in the market.

Medplus currently charges approximately ₹20 for delivery and does not foresee a significant margin drag as long as customers are willing to pay for delivery. The company already offers 2-hour delivery in urban, highly dense networks. While they are monitoring the situation for potentially faster delivery options (e.g., 10-20 minute delivery), no decision has been made to offer free or ultra-fast delivery, which would impact margins. Management emphasized that customers in smaller towns do not typically expect or require such rapid, paid services.