Medplus Health Services Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Store economics are bifurcating: Mature stores (>12 months) delivered a 6.7% operating EBITDA margin, while the company plans to add 800 net new stores in FY27, increasingly through a franchisee model that is profitable from day one.
• Private label reset is complete: After two quarters of restructuring incentives that suppressed private label share, management says the fix is working and the prior trajectory of 20-30 bps quarterly growth will resume.
• Gross margin improved 30 bps QoQ, helped by year-end supplier negotiations and pharma membership income; the company expects to at least maintain current levels, with private label gains providing further accretion.
• Diagnostics is quietly scaling: Revenue reached ₹34.78 crore (up from ₹28.08 crore in Q4 FY25), with operating EBITDA margin improving to 15.3% from 12.2%.
• What to watch next quarter: Whether private label share actually resumes its 20-30 bps quarterly climb, the pace and mix of the 800-store rollout (franchisee vs owned), and any stabilization in the operating EBITDA margin toward the 5.7%-5.8% target.

Store Network & Franchisee Pivot

• 800 net new stores planned for FY27, including franchisee outlets; management declined to split the number between owned and franchisee stores, saying it may share that breakdown later.
• Franchisee stores are profitable from day one, with store-level EBITDA of ~9.5%-10% and no associated overhead costs; after deducting ~2.5%-3% in supply-related costs, the contribution is directly accretive to company EBITDA.
• Company-owned stores lose money in year one and climb toward profitability slowly; this gap is driving the strategic pivot toward franchisees, where the company avoids managing 25,000 additional employees for a 20,000-store expansion.
• Franchisee mix shifts reported margins: as franchisee share grows (9%-10% EBITDA margin vs COCO's 11%), gross margin may appear lower but EBITDA remains similar because private label growth in franchisee outlets also lifts margins.
• Store modernization underway: at least 600 stores will be upgraded this year with smarter rack systems and clearer pharma/non-pharma demarcation to accommodate more products.
• 26-27 stores closed that were 3+ years old and not meeting expectations; other closures stemmed from relocations and franchisee withdrawals.

Mahato: "The only additional good point is in our own company-owned stores, at least for the year one, we were making losses and then we were slowly climbing up. But in the franchisee model, right from day one, we are in increasing."

Private Label: The Reset & The Promise

• Private label share declined in Q4 FY26 because the company was restructuring incentives and deliberately balancing branded vs private label growth; management says the restructuring is now working as expected.
• The 20-30 bps quarterly growth trajectory is back on: after two quarters of stabilization, the company will return to the cadence it had previously promised investors.
• The branded/private label balance is deliberate: management does not want a customer asking for a specific brand to be told it is unavailable, so overall growth is prioritized over aggressive private label expansion.
• Non-pharma private label is the focus area: the company will add assortment on the non-pharma side, growing rupee absolute value to contribute to both top-line and bottom-line.
• Backward integration has begun: MedPlus is manufacturing some non-pharma private label products in-house (bakery items under "Optimal" brand, cleaning liquids, toiletries) via its own factory; for other products, best-in-class contract manufacturers are used.
• For every 0.3% increase in private label share, there will be a 0.1% impact on gross margin; that guidance still holds.
• No specific private label target exists for the next 1-3 years; management declined to provide one, saying only that it continuously focuses on growing private label.

Mahato: "We do not want a customer who walks in and ask for a particular brand be it on the pharma or non-pharma to say that we do not have that."

Margin Structure & Profitability

• Mature store margin is not a one-off: the 6.7% operating EBITDA margin for stores older than 12 months (after non-store costs) was confirmed by management as sustainable, with no one-off items.
• Gross margin improved 30 bps QoQ, driven by higher other income, a bump in pharma membership income, and year-end supplier negotiations: certain contracts allow multi-year accruals based on performance, and non-contract supplier benefits were credited in Q4 based on units sold.
• Operating EBITDA margin target: for the next year, the company aims first to stabilize and deliver the same 5.7%-5.8%, then keep growing from there.
• Inventory is lean and sustainable: warehouse inventory at 30-33 days is maintained to meet pin-code-level demand via tail brands; if private label reaches 40%+, the company would revisit tail brands to reduce working capital.
• Returns to pharma companies are less than 1% of sales, done only on branded product expiries; reimbursement comes within less than a month, up to 95%.
• No dividend yet: management says it has not reached that stage and will discuss internally with senior management and the Board.

Diagnostics: A Quiet Second Engine

• Diagnostics revenue grew to ₹34.78 crore in Q4 FY26, up from ₹28.08 crore in Q4 FY25.
• Operating EBITDA margin improved to 15.3% from 12.2% in the same period.
• The segment is scaling without drawing significant management attention on the call, suggesting it remains a secondary priority behind the core pharmacy network expansion.

Capital Allocation & Infrastructure

• Capital allocation will follow capability: management will invest where it can do a better job than contract manufacturers, as demonstrated by the in-house factory for non-pharma private label products.
• Warehouse additions will be modest: for 800 new stores concentrated in existing states, few new warehouses are needed; entering Madhya Pradesh and Chhattisgarh may require a few, but far fewer than current-year additions.
• The franchisee route is a capital-allocation choice: expanding aggressively through franchisees avoids the burden of managing 25,000 additional employees that a 20,000-store company-owned expansion would require.

Mahato: "Capital allocation will continue to be at what we think is where we can do a better job vis-à-vis contract manufacturer."

What Management Declined to Answer

• Store split: management would not break the 800 new stores into owned vs franchisee, saying it may share that information as it progresses.
• GLP-1 data: management deflected questions on GLP-1 revenue contribution, cold chain storage specifics, and store-level generic GLP-1 launches, saying it has not tracked that data separately.
• Private label targets: no near-term (1-3 year) target was provided; management also declined to confirm whether 1% quarterly growth in private label is a reasonable expectation.
• Franchisee revenue: management did not have franchisee revenue data handy and agreed to share it after the call.
• EBITDA margin guidance: management declined to provide forward-looking margin guidance.
• Dividend: no commitment; management said it will take the question back for internal discussion.

Guidance & Commitments

Key Metrics