Medplus Health Services Ltd Q2 FY2026 Concall Summary

Key Takeaways

• SSSG turns positive at 2.2%: After a couple of flat quarters, same-store sales growth returned, driven by a rejiggered incentive plan and supply chain investments.
• Private label pharma share hits 19.8%: The mix shift continued, though management deliberately toned down growth this quarter and expects a steadier ~1% quarterly climb from Q4 onward.
• Employee cost spike is a one-time catch-up: 19% YoY growth reflects the first payout under a year-old retention plan; the accrual normalizes from next quarter.
• Diagnostics margin jumps 170 bps QoQ to 15.3%: The subscription-led model is showing operating leverage, but expansion stays frozen until the 250,000-plan threshold is crossed.
• What to watch next quarter: Whether the H2 store-opening catch-up materializes, the trajectory of SSSG after the incentive reset, and any early signal on franchisee unit economics.

Same-Store Sales & the Incentive Reset

• SSSG registered 2.2% growth after not showing positive traction in the last couple of quarters, driven by a changed incentive plan for store staff and added supply chain capability.
• The retention plan that drove it works like an ESOP with multiple tranches; employees who crossed the 12-month threshold this quarter triggered the first actual payout, and the accounting true-up landed entirely in Q2.
• Attrition fell significantly in the three major cities where the scheme launched, as the plan made full-time MedPlus employment stickier relative to consulting or part-time store models.
• Management is cautious on the run-rate: SSSG is expected to grow gradually toward 9–10% over the next two years, but the company wants to wait a couple of quarters before turning more optimistic.

Sujit Mahato: "We want to go through this journey because you have seen now it's around 2.2% plus. So, I just want to be very cautious in terms of guiding. Otherwise, we would say maybe let's wait for a couple of quarters to be more optimistic on this number."

Private Label & Gross Margin Mix

• Private label pharma share on a GMV basis grew to 19.8% in Q2 FY26 from 7.9% in Q1 FY24, though management deliberately toned down the pace this quarter after faster growth in the prior period.
• The near-term glide path is flat then steady: for the next quarter, the share stays more or less at the same level; after that, it should resume growing at around 1% per quarter on an MRP basis.
• Non-pharma private label has been steadily increasing from 7.5–7.8% a couple of quarters ago, helped by redesigning 1,500+ outlets with external shelves, adding a large FMCG assortment, and the fact that non-pharma purchases have no prescription-dosage ceiling.
• Inventory levels are consistently declining year-on-year, driven by an internal monitoring plan that balances private label and branded stock with sharper oversight at both store and warehouse level.

Sujit Mahato: "For our own products, the price and the first experience definitely drives the consumer demand."

Store Network & Franchisee Experiment

• 145 new stores opened in Q2, with a net addition of 117 after 28 closures; the H1 tally trails the ~300 half-year mark needed for the full-year target of 600.
• Management is confident of catching up in the second half, with roughly 100 of the 600 targeted stores coming from the franchisee base, a number the company says it should achieve easily.
• The franchisee model is still unproven: management declined to share year-to-date franchisee store counts, unit economics, or feedback from early franchisees, saying the numbers are too low for meaningful guidance and at least another quarter or two is needed.
• Longer-term store addition ambition is 600 to 1,000 stores annually, mix of owned and franchisee; if the franchisee channel takes off, the number could be much higher.
• Northern expansion is seeding slowly: stores have been added in Chhattisgarh and Madhya Pradesh, but the company is not pushing aggressively because significant headroom remains in southern and eastern markets.

Madhukar Gangadi: "If franchisee really takes off, it could be much higher."

Diagnostics: Margin Inflection, Expansion on Hold

• Diagnostics EBITDA margin improved to 15.3% from 13.6% in the prior quarter, showing operating leverage as the subscription base scales.
• The subscription base reached 170,000 active plans covering 351,000 underlying lives as of September 30, still well short of the 250,000-plan threshold management has set before any further center expansion.
• The model is still being tweaked: management will not expand until the desired subscription numbers are reached, and the plan remains unchanged even if margins improve further in the interim.

Madhukar Gangadi: "See, whether it is 15 or even 20, our plan will not change as far as the diagnostic centers are concerned, unless we cross 250,000 subscription numbers on the subscription side for the diagnostic side."

Costs, GST & Working Capital

• Employee expense grew 19% YoY, entirely driven by the first payout under a retention plan launched roughly a year ago; the cost was accrued over the prior four quarters, and the year-on-year growth rate begins moderating from next quarter.
• Pre-operative expenses were ₹3.3–3.4 crores in Q2, driven by hired-but-not-yet-deployed staff in training and rent on leased-but-unopened premises; management expects this to stay below ₹4 crores on a steady-state basis and trend down.
• GST rate reduction was passed through to customers from September 22. For pre-notification stock, higher input credit was incurred (average 7% for pharma), creating roughly one month of input tax credit blockage. The company negotiated extra supplier credit periods, yielding a net working capital benefit. Going forward, the GST change is a zero-sum game with no volume surge observed post-implementation.
• Fill rates improved slightly, partly due to rejiggering the incentive plan for private label versus brands, and partly as new warehouses gradually come to full listing.

Guidance & Commitments

Key Metrics