But the deal is unlikely to offer any significant upside to the Thyrocare stock that has rallied 167 per cent in the last one year, analysts said.
Thyrocare is making efforts to bolster its brand visibility through the opening of regional and zonal reference laboratories and branded collection centres and the acquisition is likely to accelerate the process,
Securities said.
“PharmEasy’s reach in 22,000-plus pin codes across 1,200 cities and increased online adoption beyond metro cities act as a natural fit to Thyrocare that primarily relies on B2B channels to generate samples that are now likely to accelerate beyond traditional markets. The online-offline collaboration will result in amplification of current orders in the home service segment. Other benefits include data generation to enable personalised healthcare, easy & affordable customer acquisition and closer relationships to provide scale,” it said.
This brokerage has revised its price targets for the stock to 45 times September 2022 EPS from 35 times June 2022 EPS, given the structural tailwind around unorganised to organised, better preventive care prospects, deeper penetration and wider reach. Edelweiss now has a target of Rs 1,450 on the stock against Rs 985 earlier.
On Monday, the scrip was trading at Rs 1,385.35, down 4.33 per cent. Edelweiss’ target suggests up to 5 per cent potential upside.
PharmEasy’s parent API Holding will acquire 66.1 per cent stake in Thyrocare at Rs 1,300 apiece, which is at a 10 per cent discount to Friday’s closing price. The total cost of the transaction will be Rs 4,546 crore. Docon Technologies, a 100 per cent subsidiary of API, will be the acquirer. It would make an open offer for an additional 26 per cent stake.
said that the deal makes sense for both the companies as Thyrocare has largely been a B2B player and can leverage the customer base of PharmEasy that may help in increasing volumes faster.
“Similarly PharmEasy offers lab tests for its customers and can benefit by conducting tests at Thyrocare, which is also a low cost centre. We expect the B2C segment of business to increase faster through this integration and Thyrocare will benefit from higher volumes,” it said.
Edelweiss said the acquisition opens a window for a higher valuation framework given that it is the first company with an online pharmacy as its parent.
“We raise revenue and Ebitda estimates by 1-7 per cent and 1-6 per cent, respectively for FY22-FY23 to factor in higher volume growth possibility through PharmEasy. We also raise our target price to Rs 1,386 per share from Rs 985 as we increase growth potential for future years for DCF calculation. We upgrade the stock to hold from reduce,” ICICI Securities said, while valuing the stock at 43 times FY23 EPS and 29.2 times FY23 Ebitda.
ICICI Securities’ target suggests nil upside for the stock.
Sandip Sabharwal, asksandipsabharwal.com, said that it is a great deal for Thyrocare promoters because of the way the diagnostic stock had moved over the last one year. Sabharwal suggested that PharmEasy is acquiring the business at a high valuation.
“Now PharmEasy needs to make it perform. To that extent, from a purely minority investor perspective, I would think that it really does not change anything. I do not think people should get too excited as the valuations at this point are somewhat stretched,” he said.
Analysts, meanwhile, do not see any major impact of the deal on other players in the industry, its highly fragmented nature and consistently rising share of organised players.
