Indium Diagnostics Index - Introduction

Indium Capital has started publishing 'Indium Diagnostics Index' (or 'IDX') to track valuation trends for the Listed Diagnostics Players in India, in addition to our quarterly updates on Indian Hospital Valuations.

The Indium Diagnostics Index (IDX) is a market capitalization weighted index composed of 5 listed diagnostics stocks with a combined market cap of ~ Rs 43k+ crores. Out of these Dr Lal Pathlabs and Thyrocare have been publicly trading for many years but the rest have been listed in the last 3-4 years.

The key highlights are summarized below.

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Indian Diagnostics Valuation Trends - Executive Summary

• Valuations of Listed Diagnostics Players (tracked via Indium Diagnostics?Index - IDX) have grown?by ~166% in the last 4-5 years (vs. BSE Sensex at ~85%). However, they have?been very volatile – a significant growth was observed during Covid, followed by a correction, and now valuations have relatively stabilized in the last 12 months?– see Charts 1 & 2
• Combined Revenue (specifically Non-Covid Revenue) has grown significantly (~19% CAGR in Non-Covid Revenue over the last 2 years)?– see Charts 3 & 4?
• While combined EBITDA has also grown (~15% CAGR over 2 years), there is a wide variation across individual Diagnostics Players – see Charts 5 & 6
• Overall average EV/Revenue & EV/EBITDA multiples are at ~8x and ~30x respectively, however there is a wide variation across individual Diagnostics Players and across the last 8 quarters?– see Chart 7

IDX stock-wise market cap performance since April 2019 (Chart 1)

IDX stock-wise 2-year market cap performance (Chart 2)

Combined Diagnostics Players' Financial Performance in the last 2 years (Chart 3, 4 & 5)

• Combined Revenue of all Listed Diagnostics Players has grown ~20% over the last 2 years (~11% CAGR over 2 years)
• There is higher growth in Non-Covid Revenue (~19% CAGR over 2 years): ~30%+ across all Listed Diagnostics Players over the last 2 years
• Combined EBITDA has grown ~27% over the last 2 years (~15% CAGR over 2 years)

Individual Diagnostics Players' EBITDA in the last 2 years (Chart 6)

EBITDA growth for all Listed Diagnostics Players has varied widely over the last 8 quarters?- Dr Lal had the highest growth (~63%), followed by Vijaya (~20%), while the rest have remained flat

Diagnostics Players' Multiples Trend over the last 2 years (Chart 7)

While the average EV/Revenue and EV/EBITDA multiples are at ~8x and ~30x today, there is a wide variation and volatility in multiples across all Diagnostics Players and over the last 2 years.

Disclaimer: Indium Capital Advisors (ICA) is an investment banking advisory firm based out of Bangalore. The information provided in this article is derived from publicly available data. ICA does not guarantee the accuracy and completeness of the data presented in this article. ICA or any of its connected persons including its directors or subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained, views and opinions expressed in this article. The information and commentaries in this article must not be construed as an investment recommendation/endorsement or solicitation of an offer to buy/sell any securities. This article is purely for educational and informational use only.