MedPlus Health IPO - Expensive Valuation For A Mid-Sized Chain, No Room For Execution: Yes Securities
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Yes Securities' IPO Report
A physical presence coupled with a readiness to handle online mean MedPlus Health Services Ltd. is positioning itself for growth in the both the channels. We understand unit store economics for a mature store doing in excess of 10% Ebitda margin translates in to ~20% return on capital employed after accounting for 22 days of warehouse inventory and corporate costs.
Albeit, we believe it might be difficult to grow ROCE beyond a point even at a mature store level. Moreover, at a company level, it would be difficult to extrapolate store level economics as corporate costs and need to open new stores would consistently act as a drag on margin and ROCE.
Indeed, there will also be cases of new stores earning less than 10% margin which would act as a drag. Given the fragmented market, we think there is space for MedPlus Health and others like it to grow.
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