Jan/15 Feb/15 Mar/15 Apr/15 May/15 Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15 CMP: 43.00 January 11, 2015 Stock Details BSE code 526301 BSE ID MEDINOV Face value ( ) 10 No of shares (m) 9 52 week H/L 46.60/23.80 Market cap ( m) 408 30 days avg vol (No) 4,210 Free float ( m) 174 Stock performance (%) 1M 3M 12M Absolute 7.9% 7.0% 15.3% Rel. to Sensex 8.7% 14.5% 24.7% Shareholding Pattern* (%) Promoters FIIs DIIs Others 60.1% % % 39.9% *As of September 2015 Relative Chart 50 45 40 35 30 25 20 15 10 5 MEDINOVA DIAGNOSTIC SERVICES LTD Sensex 30,000 29,000 28,000 27,000 26,000 25,000 24,000 23,000 Company Overview Medinova Diagnostic Services is engaged in the business of providing medical diagnostic and check-up services. The Company performs blood tests, cat scans, and related diagnostics in the fields of lab services, radiology, imageology, cardiology and gastroscopy. Industry Overview Healthcare is one of the largest sectors in India, both in terms of revenue and employment. India has been one of the exciting diagnostic markets globally over the past few years, with a growing share in In-vitro diagnostics industry. The phenomenal growth of laboratory automation, preventive healthcare generation and huge number of test menus across the labs in India have attracted a large number of people whose affordability have gone-up due to the sizable increase in their disposable income. There are about 50,000 60,000 clinical laboratories across India covering a diverse market consisting of private laboratories chains, hospitals run by Governments, Charities and non-profit organizations and a number of major private world class healthcare groups. Financial Performance Medinova Diagnostic Services revenues from operations for FY 15 declined 30.5% to 76.9 million compared to 110.8 million in the previous year. The company has reported a net loss of 35.9 million in FY 15, compared to a loss of 0.2 million in FY 14. On QoQ basis Medinova revenues declined 22.6% to 17.5 million in Q2 16 than that of 22.6 million in Q2 15. Table1: Key Financials 0 22,000 (Y/e March) 2Q FY15 2Q FY 16 Source: Bloomberg Sales ( m) 124.6 110.8 76.9 22.6 17.5 YoY Growth (%) -3.8% -11.1% -30.5% -5.1% -22.6% EBITDA ( m) 4.0 9.7-31.2-4.1 1.0 EBITDA Margin 3.2% 8.8% -40.5% -18.1% 5.9% PAT ( m) (2.4) (0.2) (35.9) (4.7) (0.6) EPS ( ) (0.26) (2) (3.78) (0.45) NA YoY Growth (%) 7.1% 92.3% -1880% -475.0% NA Source: Company, Karvy Investment Advisory 1
Background and Business Description Medinova diagnostic services was established in the year 1985 as a pioneering concept in Diagnostics. The Company performs blood tests, cat scans, and related diagnostics in the fields of lab services, radiology, imageology, cardiology and gastroscopy. Medinova gives emphasis on providing quality services and is equipped with the latest state of the art diagnostic equipment procured from World renowned suppliers like GE, Marquette, Siemens, Hitachi etc. The quality of the tests performed at the centers of Medinova meet international standards and the company upgrades its equipment to make best use of latest technology. Medinova has four centers and three franchise centers offering services at various locations of the country and it has successfully completed two overseas consultancy assignments for projects at Nigeria and Zambia assisted by African development bank thereby marking its presence in the International arena. Medinova has the necessary expertise to undertake overseas turnkey projects. Key Strengths Pan India brand image Experienced work force Risks & Concerns Intense competition Lack of incorporation of rapidly changing technology Board of Directors Table 2: Composition of Board Name Dr. Sura Surendranath Reddy Mr. Sunil Chandra Kondapally Mrs. Suprita Reddy Sura Mr. K. V. Ravindra Reddy Mr. P. Kamalakar Rao Dr. G. Ramesh Ramayya Source: Company Relation with Company Chairman Managing Director Non-Executive Director Independent Director Independent Director Independent Director 2
Industry Overview Diagnostics sector in India is witnessing immense progress in innovative competencies and credibility. Technological advancements and higher efficiency systems are taking the market to new heights. The use of advanced and cuttingedge technologies in understanding a disease prognosis has further strengthened the sophistication level of participants in the sector. Diagnostic medical imaging is a rapidly growing field in the Indian diagnostics market, which has shown tremendous growth and high profits. While nuclear imaging is the fastest growing segment within the field, diagnostic lab services is another important division that has seen an increase in the number of unorganized players. The Indian IVD (In-vitro diagnostics) market is valued at more than $ 500 million and is expected to surpass $ 1.5 Billion by 2018 growing steady at a CAGR of 20%, according to a report by Prweb. This remarkable growth can be attributed to increased healthcare awareness, desire to undergo preventive health checkups, availability of disease specific tests, corporate setups promoting health focus of employees, and drift from manual to semi-automated and automated equipment. There are about 50,000 60,000 clinical laboratories across India covering a diverse market consisting of private laboratories chains, hospitals run by Governments, Charities and non-profit organizations and a number of major private world class healthcare groups. Apart from catering to people in the Tier I cities, IVD setups are now eyeing expansion in the Tier II and Tier III cities. This can be attributed to high revenue generating option that lie untapped in these cities clubbed with minimum investment required in order to generate high revenues. These IVD majors tie-up with the existing high reputation laboratory adding value in terms of providing technical help as well as contributing significantly in the advising physicians panel. It is expected that the increasing demand for automated diagnosis will fuel the segment s growth. Competition analysis Company CMP ( ) Mcap ( m) Rev ( m) OPM (%) EPS ( ) PE (x) 43.0 407.7 76.9-40.5% -3.78 NM Dhanvantri Jeevan Rekha Ltd 23.4 98.4 79.7 24.1% 2.6 5.7 Secunderabad Healthcare Ltd 2.14 18 61.6 6.8% NM Source: BSE 3
Financial Analysis For the period ending 31 March, 2015, Medinova Diagnostic Services reported revenues of 76.9 million, representing 30.5% fall when compared to the revenues in FY 14. The company s EBITDA suffered a decline from 9.7 million in FY 14 to (31.2) million for FY 15, due to reduction in revenues. Year end March Income statement ( million) Revenue 124.6 110.8 76.9 % growth -3.8% -11.1% -30.5% EBITDA 4.0 9.7 (31.2) % EBITDA margin 3.2% 8.8% -40.5% Depreciation and amortisation 5.9 5.8 10.3 EBIT -1.9 3.9 (41.5) Interest 0.7 1.0 0.6 PBT (2.7) 3.0 (42.1) Tax (0.2) 3.1 (6.2) Net profit (2.4) (0.2) (35.9) % growth net profit -192.8% -92.0% 18313.7% Balance sheet ( million) Shareholder fund (31.7) (31.9) (67.8) Long term liabilities 165.8 7.9 16.3 Current liabilities 89.7 94.9 103.9 Fixed assets 58.8 42.8 10.7 Current assets 44.0 27.2 27.6 Cash & cash equivalents 0.7 0.5 0.4 Cash flow statement Cash flow operations -2.3 17.0-2.5 Cash flow from investing 0.71 10.44-12.86 Cash flow from financing 1.24-27.61 15.23 Per share data EPS ( ) (0.26) (2) -3.78 CEPS ( ) NA NA (2.70) DPS ( ) - - - BVPS ( ) (3.38) (3.27) (7.14) Financial Ratios % ROE NM NM NM ROCE -1.5% NM NM Debt/Equity NM NM NM Interest coverage ratio NM NM NM Current ratio 0.5 0.3 0.3 Cash ratio 1 1 0 Source: Company, Karvy Investment Advisory 4
Financial Snapshot Revenue growth (%) EBITDA margin (%) 14 12 10 8 6 4 2 % -5.0% -1% -15.0% -2% -25.0% -3% -35.0% 2 1-1 -2-3 -4 2% 1% % -1% -2% -3% -4% -5% Revenue ( m) % growth EBITDA ( m) % EBITDA margin -1-2 -3 Net Profit Margin (%) % -1% -2% -3% -4% 0-5 BVS & EPS 0-1.00-2.00-3.00-4 Net Profit ( m) -5% % net profit margin -10-4.00 Book value per share ( ) EPS diluted ( ) 0.6 0.5 0.4 0.3 0.2 0.1 Liquidity ratios 1 1 0 0 0 Current ratio Cash ratio Source: Karvy Investment Advisory 5
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