One reason why back of the envelope valuations may not make sense here is that market isn’t convinced that pharmacy retail will see so many players. It believes, like in other mature markets, this market will consolidate to 2-3 players. Once that happens, discounts reduce and margins improve. Even the gross margins would improve as organized pharmacies emerge as big buyers and bargaining dynamics play out especially with generic medicine players.
If you factor in that, PAT margin has the potential to reach 6/7% in next 3-4 years on a ~2x topline, which leads to roughly ~500crs of annual profits. On that basis it isn’t super expensive.
Plus, the optionalities baked into business – diagnostics.
| Subscribe To Our Free Newsletter |
