Medplus Health Services

Investment case

Organised pharmacy retail

Why this business

MedPlus is India's second-largest organised pharmacy chain with 5,476 stores (2.9 mn sq ft) across 14+ states as of Jun-2026, behind Apollo Pharmacy; India has ~1 mn pharmacies of which only ~22,000 are organised-chain outlets (Ken Research, 2025). FY26 revenue Rs 6,892 cr, +12%. Private label is ~20% of revenue (pharma 10.7%, non-pharma 9.3%); ~12% of stores are franchised; a small diagnostics business (Rs 37 cr/qtr) is being kept in maintenance mode.

What we believe

1. 01Structural runway: organised chains are ~2% of India's ~1 mn pharmacies; pharmacy retail market USD 30.1 bn (2025) growing 9.8% CAGR to USD 52.8 bn by 2031 (Ken Research).
2. 02Store engine intact: 5,476 stores (+146 net in Q1), guidance of 800 net adds in FY27, mature (12m+) stores at 10.4% store-level EBITDA and 12% YoY growth; FY26 mature-store ROCE cited at 80% by the company.
3. 03Asset-light pivot: franchise stores now 12% of network and 5.4% of pharmacy revenue (+164% YoY), capex on food park/wellness facility paused, so FCF should improve as expansion shifts to franchisees.
4. 04Private-label margin lever: management admits pushing private label was 'overdone'; recovering share by 0.3-0.4pp per quarter from 20% of revenue would rebuild gross margin after the 163bp YoY (~200bp QoQ) Q1FY27 drop.
5. 05Valuation reset: stock at a 52-week low, ~30x FY28E consensus EPS vs Nomura TP Rs 1,190 (+80%) and consensus Rs 1,013.

Why now

TTM PE 37.6x at a 52-week-low price; 3-yr ROE only 8.35% vs 12% in FY26; 5-yr average PE not sourced. EV/EBITDA computed on mcap + ~Rs 949 cr net debt (screener approximation, includes lease liabilities) over FY26 EBITDA. EV/EBITDA 14.6x; dividend yield 0.0%.

Market disagreement

• Apollo Pharmacy (Apollo Hospitals/Apollo Healthco): Apollo's pharmacy is buried inside a hospital conglomerate (and the Keimed/omnichannel restructuring) at a much larger valuation; MedPlus is the only listed pure-play with 5,476 stores at ~Rs 8,000 cr mcap.
• Wellness Forever: Wellness Forever (~400+ stores, west-India focus) is unlisted/IPO-bound with a fraction of MedPlus's scale and no proven private-label or franchise model.

Position sizing

Core Small cap  0.8% of the PMS on $31 Jul 2026 (August rank 27). Core positions are owned through the cycle for leadership and cash-flow quality.

Catalysts

• Q2FY27 results (Oct/Nov-2026): private-label share rebuilding by 0.3-0.4pp QoQ and operating EBITDA margin recovering from 3.5%.
• Delivery on 800 net store adds in FY27 with franchise mix rising (capital-light growth).
• Any resolution/reduction of the promoter pledge (60.7%) would remove the main governance overhang.

Risks and response

• Promoter pledge: 60.7% of promoter holding (40.2%) is pledged, with promoter-level debt of ~Rs 1,150 cr incl. interest disclosed on the Q1FY27 call.
• Margin squeeze from wage inflation (salaries +30% YoY) and weak private-label uptake; 27 young franchise stores already closed (avg 0.7 yrs old).
• Competition from Apollo 24/7, Tata 1mg and quick-commerce medicine delivery (Blinkit/Zepto) in metros, where online is forecast to reach 20% share by 2031.

Thesis-break conditions

Not stated separately on this page; the risk list carries the monitoring triggers.

Review history

• 8 Sep 2026 · Yash Palod · one-pager in "Why We Own What We Own" (p43) · portfolio as of $31 Jul 2026
• 31 Aug 2026 · Classification in the August top-30: Core

Source: Buoyant_Why_We_Own_What_We_Own_Sep2026.pdf (portfolio as of 31 July 2026), p43. Internal; external publication of these fields is controlled by audience policy.