"Covid-19 regime has changed the business mix for Thyrocare and impacted its profitability because of lower gross margin at 53 per cent (v/s 72 per cent YoY) due to the use of high-cost reagents for Covid test, aggressive pricing for Covid test; and increased employee cost at 16 per cent of sales (v/s 11 per cent YoY and 13 per cent QoQ)," analysts at Prabhudas Lilladher had observed in the company's Q1FY21 result review note issued on August 4.
"We remain negative on the entire diagnostic chain due to possible structural change in the coming years and expensive valuation at Mcap/sales of 10.3x, PE of 60x (FY21E) and 40x (FY22E)," they had said.
The brokerage had a "SELL" recommendation on the stock with the target price of Rs 307 based on 18x of FY22E.
Edelweiss Securities, on the other hand, said it believed the business could bounce back by Q2FY21-end, but only in Sickness, whereas Wellness is likely to remain subdued for a longer duration.
"The weaker-than-expected Q1FY21 performance prompts us to revise down FY21/FY22E EPS 26%/5%. However, given the robust long-term outlook, particularly on preventive healthcare, we raise our target multiple to 30x (from 25x). Maintain ‘HOLD’ with revised target price of Rs 650," the brokerage had said in a report dated July 31.
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