01 — Opening Hook
The Acquired Growth Magician
Picture a diagnostics company that walked into earnings and announced Q3 revenue of ₹50 crores, up 98% YoY, and everyone cheered. Then you realize ₹24 crores of that came from a Belgian acquisition (Coris) they just bought in August, and ₹8.8 crores was a one-time government contract for HAT (sleeping sickness) that expires in two years. So the core domestic business? Growing at maybe 10-15%, which is… fine. Not sexy. Not even interesting without the acquisition accounting magic.
The management is honest about this. They admit margins are under pressure from competition, the diagnostics industry has only 7-8% CAGR (excluding Dengue/Flu spikes), and they’ve planted a flag in next-gen technologies (dPCR, NGS) that aren’t monetizing yet. But they’re also betting the house on FDA approvals for Coris in the US market, which could take 3-4 years. Read on. This one’s a patience play wrapped in a growth facade.
The Plot: One-time revenue from a dying tropical disease contract + acquisition accounting + seasonal Dengue spikes = Earnings that look better than they actually are. Management knows. They told you. Will you listen?
02 — At a Glance
The Quarterly Numbers Play
- Q3 Revenue: ₹50.4 Cr (+98% YoY) | But ₹24 Cr from Coris acquisition, ₹8.8 Cr from HAT one-off. Strip those: +15% organic.
- Q3 Operating Margin: 43.6% | The diagnostics business still prints cash. But watch pricing pressure intensify.
- 9M Revenue: ₹99.1 Cr (vs ₹64.8 Cr last year) | Growth masks composition. Coris: ₹24 Cr. HAT contract: ₹8.8 Cr. Core: ~₹67 Cr (+10.2% YoY).
- 3B Domestic Growth (Ex-Coris): +11.8% YoY | With seasonal Dengue spike removed: +20%. Without the spike? Back to baseline 10-12%.
- EPS (Q3): ₹25.32 | TTM: ₹66.9. Stock P/E: 18.2x. Not expensive if NGS and Coris scale. Expensive if they don’t.
The Honest Truth: This quarter screams growth but whispers stagnation. Strip acquisitions and one-off contracts, and the core business is growing at industry rates. Problem: Management now has ₹190 crore cash and is hunting for more M&A to sustain the illusion.
03 — Management’s Key Commentary
What They Said. What They Really Meant.
Dhirendra Dubey (CMD): “9-month growth is at 99 crores versus 64.80 crores last year. But if we remove the seasonal spike from Dengue/flu, we’re growing at 20% plus because seasonal parameters are beyond our control.”
😏 Translation: You can’t credit our skill for Dengue. So ignore it. Poof. Magic. Watch us now. (Spoiler: Without the spike, it’s a 10-15% growth story.)
Dhirendra Dubey: “Our total addressable market is around ₹400-500 crores. We have 12-15% market share, which is quite high. Maintaining that position itself is a challenge.”
🤷 Translation: We’re a big fish in a small, competitive pond. Can’t grow much more without cannibalizing margins or getting crushed by new entrants.
Investor Ganesh: “You mentioned increasing competition. But why is competition intensifying now, three-four years post-COVID?”
💣 Management’s Answer: “Because our margins are high. It’s a lucrative business. New players keep entering.” = Free market. Don’t ask them to build moats.
Dhirendra Dubey: “On Coris, for next two years at 1.5 million units, it should continue till the 6 million contract is finished. In parallel, we’ve started US FDA work for their products.”
⏰ Translation: The HAT contract is a sunset business. We’re betting on Coris’s US FDA approval to replace that revenue. That’s 3-4 years away. Hold your breath.
Dhirendra Dubey: “Credit is now a very important part of doing business. Labs take 3-4 months, sometimes 5. Competitors do the same. We’re on par with industry terms.”
💰 Translation: We’re locked in a race to the bottom on working capital terms. Everyone extends credit. Money going bad is very low, but that’s only because big labs are reliable. One customer default = pain.
Dhirendra Dubey (on NGS): “NGS is not our key strategy. Margins are very low. Companies are losing money in NGS. We’re there to be technologically relevant, not to make money from it.”
🚪 Translation: We’re hedging. If PCR goes away, we don’t want to be naked. But today, NGS is a sinkhole, so we’ll keep it small. Smart move, but admits the tech moat isn’t there.
04 — Numbers Decoded
The Financial Scorecard
