MedPlus Health Services Ltd
NSE:MEDPLUS
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MedPlus Health Services Ltd
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Ladies and gentlemen, good day, and welcome to MedPlus Health Services Limited Q1 FY '24 Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Prasad Betty from Metro Health Services Limited. Thank you, and over to you.
Thank you, Randi. Good evening, everyone. On behalf of MedPlus, it's my utmost pleasure to welcome you all to the MedPlus Q1 FY '24 Earnings Conference Call to discuss the financial results of MedPlus for the first quarter of financial year '24, which was announced on August 8, 2023. We have with us today the MedPlus Management team, represented by Mr. Madhukar Gangadi, Chief Executive Officer and Managing Director; Mr. Sujit Mahato, CFO; and Mr. Chetan Dikshit, CFO. Before we begin, I would like to mention that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Please note the disclaimer mentioning the risk and uncertainties are on Slide 1 of the investor presentation shared with all of you earlier. Documents relating to our financial performance have been circulated earlier, and have also been posted on our corporate website. I will now hand over the call to Mr. Sujit. Thank you, and over to you, Sujit.
Thank you, Prasad, and good evening, everyone. As of June 30, we have been serving the health care and household needs of communities in 581 cities across 7 states through our extensive network of 3,975 farmers [indiscernible]. During the current quarter, we have successfully expanded our presence into 29 additional cities. In addition to our currency operation, MedPlus operates for full-service diagnostic centers, 7 Level 2 centers, and 122 collection centers. These facilities play a crucial role in our commitment to providing affordable diagnostic services to our customers, an important milestone in our diagnostic journey where we have crossed the 1 lakh active membership as at the end of the current quarter, covering 18,000 lives. Our comments on the network. Our store expansion program remains on track as we continue to balance growth and profitability. Over the past 12 months, we have added a net total of 95 stores, with 168 stores opened in Q1. Notably, West Bengal and Karnataka saw the highest number of store additions with 53 and 32 stores, respectively. Of the store openings in Q1, 53% were [indiscernible] cities and beyond, reflecting our strategic focus on these markets. Currently, out of our 3,975 stores, 1,762 stores representing 24% are located in Tier 2 cities and beyond. We recognize the potential of these markets and aim to further expand due to the maturity of our operations and robust supply chain capability. During Q1, we experienced 15 store closures. Considering both bookings and closures, we achieved a net addition of 153 stores in Q1 compared to 265 stores opening in Q4 of the previous year. In terms of age of our network, approximately 27% of our stores are less than your own. Around 22% of our stores are in the second year of operation. The remaining 51% of our stores have been operating for 2 years or more. To illustrate the impact of our rapid store expansion on the age distribution of our network, by the end of Q1, approximately 49% of our store fell within less than 2 years bracket. In comparison, during Q1 FY '23, only 45% of our stores were less than 2 years old. It's important to note that all stores in the less than 2 years age bracket are still in their ramp-up sale. From a financial perspective, they currently have a negative impact on our operating EBITDA. However, as these stores mature, we anticipate them contributing positively towards profitability. We closely monitor the time it takes for our new stores to break even. The first store opened between July 2022 and December '22. Approximately 58% of them achieved breakeven within 6 months of operation. Additionally, as of Q4, all the stores combined achieved breakeven in just 4 months. Network and the store size. As at the end of the quarter, our network has grown to 3,925 stores with 2.1 million plus square feet compared to 2,980 stores, representing 1.7 million square feet at the end of June 22. The average store size is 542 square feet. To give you a sense of spread in-store prices, we have 2,855 stores, less than 600 square feet, and 1,120 that are greater than 600 square feet. With our expanded scale, we are strategically positioned to enhance our revenue share from private-label products. Our private label range is designed to offer customers high-quality products at affordable prices. Currently, MedPlus offers over 1,300 thoughtfully curated SKUs spanning across pharmaceutical and nonpharmaceutical categories. Private lay book sales accounted for 13.2% of our total revenue. In Q1 FY '24, we have observed a reduced pain in our private label due to extended summer and delayed banking. Furthermore, our expanding presence in Tier 2 cities and beyond is making a significant impact on our revenue mix. Sales from these markets accounted for 34% of our pharmacy revenue in the current quarter, demonstrating an increase from 31% in the same period last year. New offerings, MedPlus has introduced the MedPlus Advantage farmer subscription plan for its customers in Hyderabad, offering several exciting benefits. To become a member of this plan, customers are required to pay an annual subscription fee of INR 499. Initially, the company is offering the subscription at [indiscernible]. As part of the plan, customers gain access to MedPlus-branded products at discounted rates ranging between 50% and 80%. Initially, the plan covered 433 pharma products, and the company is now planning to expand the offerings to include more products. The financial numbers. On our quarter performance, the consolidated revenue was INR 2,843 million, with a growth of 29.2% year-on-year and 2.5% quarter-on-quarter. Our consolidated operating EBITDA stood at INR 291 million, representing 2.3%. Around 99% of our revenue is from our pharmacy operation. The farming operating EBITDA is $343 million, representing 2.7%. On our store performance, I would like to update on our core older than 12 months. Revenue from these stores in Q1 was INR 11,0124 million or 89% of pharma revenue. These stores had a slow level EBITDA margin of 8.9%. The store level operating ROCE for the stores stood at 49.1%, [indiscernible] on the store EBITDA margin by age, while score greater than 12 months had a margin of 8.9%. This was 9.7% or score greater than 24 months, and 6.1% was stored in the 13 to 24 months A bracket. If we allocated the nonstore related cost, then the operating EBITDA of so greater than 12 months will be 452 million, which translates to a margin of 4%. On our diagnostic numbers, diagnostics revenue has grown to $139 million in Q1 FY '24 compared to $32 million in Q1 FY '23, which is primarily due to the launch of new centers in Hyderabad. Diagnostics segment recorded an operating EBITDA loss of $56 million compared to a loss of $52 million in Q1 FY '23. On the working capital details, our net working capital for Q1 was succeeded day, the inventory in our warehouse was 35 million. As you are aware, because of the sales trajectory of new stores, their inventory turnover is lower in the first year. In Q1, the inventory level of cost a store was 114 days. In comparison, for a store older than 12 months, the inventory was 41 days. Now I defer Chetan to update on our Diagnostics business. Over to you, Chetan.
Thank you, Sujit, and good afternoon, everyone. [indiscernible], we now have 4 food service diagnostic centers, 7 leveraging centers, and 122 collection centers. In July of this year, we made 2 clicks to the Nets Advantage plan. Firstly, we made the consideration scalable. So now add-on participants, for example, a family member, can be included anytime during the 1-year tenure offer plan. Secondly, we increased the price of our plans by 150, [indiscernible] we introduced the same 150 as a discount for timely renewal. In effect, our whole members will have the option to renew on time at the old price. There's no change to the benefits. Any customers netlist advantage can avail the full range of radiology tests and pathology tests at 75% discount to MRP. As of 31st March, we had 93,000 active clients and 162,000 underlying lines. As of 30th June, we had 105,000 active plans and 186,000 underlying months. We are now setting our pipes on the 350,000 underlying live milestone. For this quarter, in April, we sold 333 gross clients per day. In May and June, which was 308 and 332, respectively. We have launched methods advantage in March 22. After the completion of 1 year, our current observed on-time renewal rate is 15%. In 60 days post 6 finds, we have observed the renewal rate to be at 30%. That's an update on diagnostics. Now I'll hand over to Madhukar Gangadi.
Thank you, Shekhar. On June 17, we launched our new product line in our stores. It's actually [indiscernible] on the private label which we had earlier, our [indiscernible] products, were sold under the name of Omotesando and they were offered as such cuts as a convenience to customers who are customers Kurumedonot has a different set of products or a new prescription. These were sold at the same price as originated ransom, and there is no present market. And as I said earlier, we sold to comment kind of product at that. But for the last few quarters, we have been observing that more and more customers are now looking to actually paper or at least have been asking for unbranded or generic products. So as a response to that and as a response to the flat, the Indian customer is now more aware than before, and the fact that most of them will realize that 80% of all the ratios sold in the country are off patent and are actually effectively to those products with really no big difference on the dictation everything else.So given that most people have now realized this, and they have been asking for this kind of product, we take it was the right time for us to introduce a set of products at this point. The big difference now is that while the earlier similar half of us just [indiscernible]. We have now started offering those actively to customers who are looking to go for a less expensive product on the branded product out there. So this comes through a membership plan. The membership plan will be [indiscernible]. We have started it a senate plan as a mobile at and what it offers to the customers is 50% to 80% [indiscernible]. We have started with 433-odd products. We expect that we'll extend this to around 800 coming months. We have actually launched it only in abroad rest of Temando as of now. And I'm happy to tell you that the update with the customer come fantastic. We are actually seeing a large tier of customers asking us for these products, I think the quality is pointed, talking that the cutaneous brand and as a substitution. So hard to tell you that. As of Gila, we are at a total of roughly around 13% of all the products sold in our stores today are also membership plans. This while it was so the discount is still margin applied to us. It also helps in bringing in new customers into our stores. We are average seeing a lot of customers who wholesale in the past 3 months walking back to the stores for the products of the membership plan. We expect, as we go forward that the 14% will continue to increase. We also expect to launch these products across all the states in Pantry. We expect this to not just add to our margin but also add to the company. We believe now we are at the stage where the metros point is accepted. We will now start seeing at least offering customers one, the best [indiscernible], if the customer is so limited at a price, which is [indiscernible]. We will now begin the question-and-answer session.
[Operator Instructions] The first question comes from the line of Ankit Bansal from AD Private Line.
My question is, sir, your private label brand, which you recently started. So can you please elaborate on the kind of manufacturers you have been tied up with permission, which will help for the industrial growth of the company looking forward?
Yes. So we are sharply strait around 10 different manufacturers across the country. I don't want to give you any names on there right now. But these are people who are actually doing the largest plants in the country. We have the best -- I would say, there is one of the better facilities in the country and for us, we are very confident that this can actually give us quality, which is on par with the strength of the country.
Okay. My next question is, Sir, any idea of expanding to Natalia, any in the mind, sir?
We are actually expanding into the contiguous states in which we are always present. We are going into [indiscernible]. We will definitely be looking at the margin expansion, but not a plan as we [indiscernible].
Okay. Sir, are you seeing healthy competition, or is competition getting more coherent offers with e-commerce, like local manufacturers are also -- I'm witnessing a lot of growth in their businesses. How do you see them sell?
So there are 2 parts to the question, I guess. One is the farmer. We are seeing -- while a couple of players have actually reduced the amount of discount again definitely reduce the amount of agonizing OR, not everyone is doing that, obviously, were one of the players to continue to advise. On the local manufacturers penalty, I can't really comment on that. What we believe is that MedPlus I would say, we are the best purveyors of complete sorts of branded generics. Our scale allows us to actually do a price which knows the match. At the same time, we also have a size scaling capability, which allows us to actually make or at least have these drugs contract mandate at the best specialty croton given the prices which are normal can match. So for us, we really don't see any of the smaller and local manufacturers being competition.
The next question comes from the line of Nikhil Mathur with HDFC Mario.
So my question is on the revenue per store that the company is generating. I'm looking at the pharmacy count numbers taking the pharmacy revenue, dividing it with the number of stores, and kind of analyzing it by a decline of 4. So this quarter, the company is at $12.8 million. This has consistently been coming down, not very sharply, but if I look at the previous quarters, some 13.2% to 13.3% was in the first 9 months of FY '24, and it's now over 12.8%. At the same time, if I look at the aging of stores, the number of stores which are year are classified in your investor presentation, that has come down from 30%, 27%. So I'm not sure what I'm missing here that despite the aging profile kind of improving the revenue per store is trending down, not trending up?
Yes. So abating. One, the store continues to mature until it actually goes to 24 months. While yes, last quarter, we probably would have slightly less number of stores which opened. The overall number of SMP or core still is pretty high. It's more than 50% of the overall network. And that is what is actually driving the overall undertone. For us, we really don't see any other impact other than a small seasonal impact on Q1. It is normal. This time, we extended a kind of summer. Typically, if we may buy rentals usually, the summer months don't really have interim of, I would say, infection of note concern, which would have seen some kind of amuses. So that's one. And second, the extended summer is also basically related to some of it. Other than that, I think we don't see any.
Right. So adjustor seasonality December would have been much better than how do you plan to suggest?
I would say, no, no, no. See, the big effect is definitely off the 50% of stores, which are under 2 years. Seasonal thing, it's a quarter kind of thing at all.
Okay. So sir, I mean, we still have 900 -- I think 800, 900 store addition plans in this year and next year. At what point would there be some leverage available on revenue personnel? And I think this is what will drive margins as well unless your revenue personal increases. I'm not sure if the margins can trend up to what some of your companies -- I mean, like a listed company, which supports the pharmacy margins, they are -- they seem to be much higher than what MedPlus is at. So when that kind of break happens when the revenue per increase and that kind of flows through.
So as we have been saying since the beginning of the year, last year, we said we have actually 1,000 and 1,200 stores. We ended up at around 45%. This year, we've been calling 2,000 stores. We are conscious of the fact that margins will titan. But more than that, we are actually, I would say, extremely cautious about the mine. We want to make sure that they have approval. We don't need to really borrow too much to actually expand. So for that reason, we are basically going between the policies this year. Second, the margin expansion expense will actually come through several things. It's going to come through the maturing of the stores, in particular, we will basically definitely at this close become more profitable. And as you go forward, as we note on the INR 4,000 crore top line further towards the panda for the next year. I don't expect that the arrival and the pocket costs are going to keep in line with that. So there will be tentative. But more than anything else, I think our recent, let's say, initiative of reading on the metros brand of private labels at 50 days percentage out. I feel extremely confirmed that this is what is going to actually drive the top line. It's also going to drive the article. As I said, we just closed it on June 17. And as of now, we are visibly seeing the overall portion points. And this has just been launched on a [indiscernible], so we're very confident that not only will this bring in more customers to the Metro store, it will also be marination as we go. The platform which we have built will basically now start getting monetized significantly because you require this kind as well, [indiscernible].
Got it. And sir, one more question I had was, if I look at the employee cost and other expenses, can you give some ballpark indication of what percentage of these costs are sitting in the corporate overhead? And how much of that is in store.
I'm sorry, one of the questions I mean...
The employee expense and other expenses, what proportion of these expenses are related to the corporate overhead? And what percentage is related to stores?
See, I'm not sure about the exact, but let me just give you the numbers. On a full year 2-year store, we expect 10% to be at this low level. And below that, we have a 2% corporate expense and a few percent where than expected. [indiscernible] So the overall -- the 2-year qualifier was the EBITDA. So 2.5 that's when we hit a 10% EBITDA, but below that, then you would always have them. So no math to interact before the level is 2% on corporate and 3% on where I think would be normal.
So if your entire network system was to be 2 years old, MedPlus consol entity would be reporting 5% EBITDA margin. Is that the right understanding?
As of now, yes. But as we go forward with scale benefits and with private labels and everything else, we expect business to be able to grow.
Okay. And we're talking about pre-Ind, right or not?
Yes. All rents and everything is taken into account.
Got it. So I'm not sure if it's the special investor position. What is the de position as of this quarter?
Net debt to 0 as of this point.
And one last question. How much inventory is sitting in the stores and how much inventory is sitting in the warehouses?
For any store, which is more than 1 year old, 39 days of inventory fixed in the store and roughly around 30 to 35 days, it's in the warehouse.
Okay. So for a reasonably material [indiscernible].
After 1 year, it pretty much remains the same. I would say, for a store which does more than 1 per day kind of stuff, it probably will come down to 28 to 30 days. But on the whole, I would say across the board at the store level, it is roughly around 30. The number starts falling significantly after one or after 1 year, it starts off with 18 lakh in entry and a lot of penitentiaries per month, which is of either initial stage.
Okay. And sir, one final comment on discounting fees. I mean we are hearing various dispose around e-pharmacies being under pressure because of funding constraints and all. Is there any way to the argument that discounting should come down systematically and that should benefit meteor would you keep discounting higher in order to gain volume share, which has been the strategy till now?
See, we defined seeing slightly less nose on the discordant side from some of the pharmacy companies out there. But as I've been actually maintaining in the past, e-pharmacy is a small portion of the overall business and what we are seeing is a lot of the small independent operators are selling a lot of page limits as brands, and we are basically pushing up the discounts out there. So there is some competition out there, and our own private label is a 50 to 80% discount is, I would say, kind of a move towards countries the same as. In our own experience, we have been seeing more and more people buying about 1,000. Our builds a 1,000 has actually gone since this quarter has actually gone in a side it comes due to [indiscernible].
The next question comes from the line of [indiscernible].
Sir, the first question is on the store closure. So this quarter, we had almost 15 sources and the average is more than less. So did that impact our financial growth in this quarter?
No, no. So that's a pretty standard set of closes, I think you have to -- you talked about store closures, right?
Yes. So far, I think, for 8 schools, it was because of relocation, but there is another item which is other, and we are not sure what is that. And also, if you can highlight if the realization or leads to sort [indiscernible] that particular amount of market.
Yes. No. So if it is not relocation, then it is definitely a test that could be where we have had a problem remains or something like that. Yes, it could be visibility; it could be some pharmacy.
Okay. So assuming a mature store can do anywhere between 1, 1.5 year, right? So does that mean that you would have lost almost 8 to 10 times of annuity?
I don't see it that way because you're already relocating more of the stores. Some of them are actually going somewhere else anyway. So in all these markets, there are almost no places where we would have it does not attract a store-to-store relocation. You'll probably get better from the average store. It's unlikely that I would -- I wouldn't take that as a line.
Understood. And again, on your new plan, which was launched for generic, right? So I understand that our private levels are around 13%. And what would be the revenue from these generic products?
See, earlier, when we talked about the 13%, 13.5% private label, we were talking mainly about -- we're talking about a whole spec in the complete set, which has medicines nonmetal. So earlier, if you look at only the pharma side, it is around 8. Now that has actually moved to 4% and 4.5% overall. But given that the new set of private labels, which we have come with a big discount, I am basically comparing this as a sale, which means the entire sales in the store, the overall sale of INR 10 on the market, the discount would normally be 7% or whatever it is or make sure that the comparison is like for like get these products comprise 4.5% or 100.
On MRO and our margin profile on this growth would be Tier 2 drive. Is that correct because your comps will be similar?
On an absolute margin, this will be far better than the branded products, but it will definitely be lesser than the old private label, which we have. But when we tell these generics -- so is it fair to assume that it can also cannibalize our pine because, let's say, if a customer is not comfortable seeing, let's say, a third-party brand to some other brands, right?
And he wouldn't want to actually go for an unbranded plan. Is it fair to think that we might actually -- it might actually finally to 5 levels.
So see earlier, we had a private label that has been sold at the full call. And now we have got the MedPlus brand, which is actually so like this part. The plan is to go forward, and basically, it must go to simply on [indiscernible]. The reason for that is we want the store employees to be focused on selling this one product and not look to start not, I would say, being trying to sell the slightly higher cost, higher margin product at the cost of, I would say, confusing the customer basically saying that, okay, I don't have this product as something I'll discuss GDPs which go to the beta go. So we don't want that kind of message going out. Hence, we have actually met or, initially, the margins would definitely get effective slightly, I would say. But given that we are able -- the overall, if we were selling let's say 8% of plate earlier now, which is 4.5 is on a combined stat, we expect -- and this is growing really rapidly. We expect that vary from time down. We will be at least even as of now, I would say the margins are more or less in line with what we were earlier. But the big difference is are announcing the 50% to 80% membership brand has actually brought in a lot of new customers, and we are seeing growth in the top line, which will take care of all these other issues.
Understood. And last question from my end. So can you share the growth number for more than 2 years old?
I'm not sure. Okay. I'm not sure. I think we will come out of the numbers shared, but I don't think I can tell you that now.
Okay. Can you tell us directionally, whether it has improved or not because probably out of any other competitor, it probably we are offering higher discounts? So has that actually resulted in some volume gains or a better fleet, if you can see the direction that will also put...
No, no, absolutely. The new private label initiative of MedPlus has definitely resulted in extremely good growth. In the small sat, I would say, not really small. We have actually launched it in Hyderabad. So it is definitely good. So we have better-looking growth in July and August.
The next question comes from the line of [indiscernible].
One is [indiscernible] your own branded private label on Pharmatech. Can you talk more about like how many you see you are currently having, what is your expansion plan in that? Apart from that, what will be the exit as a percentage of say the current competition, and how the unit economics are in this particular part of the business?
I'm sorry, you're not very clear on to make out. I know you're asking about the private-label drug. And can you just repeat that?
Yes, let me repeat. So first, sir, first, one thing about how many HD you currently have and what is expansion plan just brand coverage. Secondly, how the unit economy was in this part of the business? And thirdly, what is the exact contribution right now from this particular business as a percentage of...
What is the second question?
You need to come... How do you [indiscernible]?
So yes, we started with 433-odd products. We are now expanding it to 800. We continue to basically receive products and services across the country. And over a few years of the next 3 months, we'll probably be there closer to that number. So ideation is the number I'm looking at. That's a number of the states. And these are all over work notes, oral solids, bandits, everything in the oral screens, and erosion. The contribution is roughly around 14%, 14.5% as of now in Arabia Investor Colonna. We expect -- and that is a number of origin. And going forward, we expect this number to go closer. Actually, I fully expect that as we increase the overall number of products to be [indiscernible]. INR 100 MRP drug has a weighted average discount of roughly 55% to 60%. So we'll actually end up in net for net revenue of it. Our margin on that would be in water 60% to 70% on the net sales. If we look at the MRP has been [indiscernible].
And secondly, you were guiding your overall top line to be somewhere in the range of 25% to 30%. Now you would like to change your guidance considering that will be siloing your branded ratios.
Is your question, the impact of a margin between our traditional private cable and the new metro brand? We're struggling to get your question. Did you ask us to make a comparison of a margin between our traditional private label and the new MedPlus brand [indiscernible]. Yes. So fine. So let's take both the products are selling at around INR 100 a month. The old one would have had a net revenue of 83% and the new one probably has a year between 40% to 45%. So that would be the revenue side. On the margin itself, the products are made at more or less item costs. So we would definitely -- we would -- after GST, after the incentive to employees, and after all the other costs, we'll land at roughly around 21% to 22% on MRP. So let me go to... INR 2 crore to INR 22 versus INR 50 on the old if the price of the product will be given. And this is after taking into account all costs, including GST and advances.
Okay. And sir, just on the last question. Sir, I was asking about the overall revenue growth for the company. So our expectation was around that coming to grow around 25% to 30% range. And now the addition of this new business venture. So would you like to change your top-line guidance for energy like be less than 30% or something?
No, no, not really. See, this is going to be a significant, but still a small portion of our overall business. But while it is 10 to 14% to 20% or whatever, it also will help us basically add that from customers. So I really don't see any need to change the overall top line. It could be more. I don't think we will definitely here we feel okay.
The next question comes from the line of Madhav Marda.
Yes, 2 questions on my side. The first one was with this metal-grade power range is all are launching, if you just take any one FPU as an example, if somebody buys the branded generic version versus the one that what MedPlus is selling. What would be the net saving that the customer gets, just trying to understand that bit.
So it's a little difficult to give an exact number because it would vary depending on the type of drug. If the product is a DTC of the product under price control, then earlier, we would normally get a discount of, let's say, 30% as we bought because the overall bill was about 1,000. Now the discount will be from INR 30 to INR 40. This underspent. On the one you are not under price control, it could go anywhere from 50% to 90%. So, the next saving out there will be let's say, even to take it at 80% of the top end. So it would still be a 62% addition is coapt.
So basically, there's a simple --
Let me just qualify it by saying one more thing. While the entire range is a substitute, what we are seeing is the overall average discount, which was filed is around 50%. So we would say around depositions on a typical about 1,000 pursuits of a branded drug, 40% saving for the customer.
Understood. And just a second question was basically, you see expanding more into the Tier 2 and beyond kind of locations. How does the unit economics change in terms of the kind of investment that we make and the sort of sales per store with margins? If you could just help us understand that economic.
T2 and T3, obviously the rental or the overall inventory would definitely be slightly lower and the cost of rent is also lower out there. So it also means that the top line is also slightly over by 15%. But what we are seeing is even that the product needs to be usually better in terms of profitability for us because a lot of people acetate there. We see that on a smaller top line, the net EBITDA is slightly actually higher in a small term. That's because the costs are lower and the product mix is before.
And what percent -- okay, you mentioned how many stores are there in the Tier 2 can you have mentioned that it...
I think roughly around 30% of our [indiscernible].
The next question comes from the line of [indiscernible] with Elara Capital.
Hi, good afternoon. Let's welcome on the real question this is regarding the revenue per store. Has many of your new store issues are happening in partial sounds where the population will be more big and maybe some number of subsidies that option will be less. So is it possible that our revenue per store can remain a good subject from earlier even if the sales mature?
You're saying because we have more flows in smart towns, the revenue will not grow because we are in boots.
Yes, the revenue first 12 stores will be lower compared to our mix of stores a year back. So in the overall revenue per store have compared to what it was earlier?
No. I see it's always going to be slightly lower than the metro, but the costs out there and the product mix is better for us. Hence, it is actually a more profitable store. We end up actually -- there's a lot of potential for opening new stores in small towns. And so once the supply chain is set up once we have the central warehouse and the main captions we are getting all the polling set up out there. It is every additional store is probably and then you pursue that and the top line will be slightly lower than Tier 2 City.
Then, on the bio part of the business. So if I say right, you mentioned that the video rate is coherent. [indiscernible].
We are seeing other subscription businesses across the world, and we see that wherever people don't need to test there is no penalty on not insuring in the exact time pipe tends to renew over to respond. So we are happy with the business and I don't think this business is in the highest model at the time.
The value works fine even if we're nearly very different. Correct?
Out this year, we have 12 large centers in Hyderabad, 11 actually set up and will get added on. We have 120-odd collection centers, and we also have home service. And these can serve the entire city of Hydrea, which has a population of a crop. Our model, ratably is dependent on profit from a subscription base. And today, within the year and most of the -- even, let's say, 18 months, where at least for a major part of this period in which we started the business in the tag business. We had only 2 centers. Despite that, we have actually gone to 110,000 members. We see no reason why it cannot be 250,000 and much base do go forward. And from that, I know some people there will be a rolling kind of thing there, refine with us. So we're looking at a much bigger pool of subscribers that we follow as the brand continues to grow and as more and more people come on to the services we have.
The next question comes from the line of Ashish Jain with Dama Elvis.
My first question is on gross margin. So just an understanding is 130 bps Q-on-Q compared to only because of the private -- or are there any other factors in place which could be both, and we can see some margin appreciate coming quarters?
Yes. See, the gross margin, if you have to look at it, the direct effect is of the 0.4% extra discount actually. And this is, I would say, kind of seasonal. There's also the, I would say, the reduction in the private label is a prior level typically in Q1 is slightly later mainly because of the reduction in the infectious standard view, which usually has been going up obviously in markets. So both those combined have actually been a pretty good dip in the overall gross margin. And we also have a small onetime in hardening and that has also resulted in 2 years again us gross margin.
Sir, you also think you have also introduced some select advantage plans which a 50% to 80% discount. So is it fair to understand that 21.5% kind of gross margins are a kind of steady state?
Yes. So as I said earlier, despite the discount and despite whatever we do out there, it is still a margin operator. It actually is slightly more than 30% of the four on the much standard drugs. And the important thing of there is this, this is a [indiscernible], the MRP is in our control to a larger stent and in the guidance of the coming regulations amount and 50% to 2% discount is also something which is in our control. So the goal for us would be to bring in as many customers as possible and improve the overall customer base. And then we would have the purport kind of platform to increase obviously are being to dispose go forward. 50% to 80% is a pretty light range. I don't think it would be difficult for us to increase the carton.
And just lastly, on the Diagnostics, excluding the fourth center lost, is it possible to share what is EBITDA loss for the nets expect all of the centers to EBITDA? And then what are the steady-state margin that you're expecting from the entire business?
Aashita, what we've been saying on kind of contract is we've been saying that these centers turn EBITDA net from the on roughly around the 8 months onwards. And even though Q1 has been a seasonally weak quarter, we've been seeing the projectory in that direction. But if you have a more specific question, you may take it offline, please.
Sure. And this last one, is just one clarification. Since have launched only in June, the MedPlus Advantage Pharmacon, where [indiscernible].
I think your question is that where are we reporting the revenue for the new MedPlus branded pharma? Is that your question?
Yes, that is my question.
Okay. Is it set as of now, as of this quarter, is it still included in private label pharma? So it is part of that earlier group of [indiscernible]. Bund, its conservation in the last quarter would be really small given that we launched it only on Menabrea and only on June 20. So I expect we'll probably have a slightly better [indiscernible].
The next question comes from the line of Nikhil Mathur with HDFC Mutual Fund.
Sir, I just wanted to extend the argument of metro and nonmetro store expansion. So in summary, how to conclude, is the EBITDA per store better or worse off versus a metro store in non-metro cities?
It's actually better.
Okay. And what about working capital? I mean, is there a more elongated cycle of working capital in non-metros?
Not really, no, because the radio products, which are asked for in a non-metro store, are much lesser both in terms of medicines elicited as we go forward as a private [indiscernible] to increase the extenuate level, if we go north of 30%, given the fact that our cost of a product is in the, I would say, low teens on a 100 product, less as a 60% is the cost of products for branded given that the small times will actually sell more, and we'll stop more of that. We actually think that we have less segment at each store. [indiscernible].
Okay. So basically, non-metropolis accretive on both working capital as well as on EBITDA gusto.
Yes.
Great. And sir, since you have 10 warehouses. Can we get to how well are these warehouses currently utilized? I mean, are your warehouses back to capacity or there is significant space to be properly utilized in these warehouses?
No, no, I'm afraid most of the areas are played almost fully. We are looking to expand the label gain there. And again, that's a little bit of effort.[indiscernible] actually make the Zaras more spacious and more easy to operate in the cost of an will actually come down. No. As I answered your question, they are all being utilized here, and I don't really see too much expansion in the overall cost even as we expand the number of stores in good change, as we go, let's turn into the newer states and as we expand into elasticities. Right now are operating from the layer of the industries which are indeed to those. But as we go forward, those number of stores go from 20 to 50 so we would definitely see from there, but that's not in this year.
Right. And one final question related to this. Is there scope for a lot of automation in your warehouses? I mean, there are so much technological rates happening in terms of vertical cladding, energy cost saving, you can do a full dark kind of warehousing without the requirement of lighting and on. Are there a lot of technology to development that Metalsa, a company can deploy in its warehouses to kind of grow or poor efficacies?
So we are now looking to [indiscernible], and this will probably happen over the next quarter or so. In fact, we have actually [indiscernible]. In fact, half of the oral or at least half of the tables transactions in our rereading Atopic from the automatic packing machine, which has ended for us. We are now looking to -- and the reason why we have not actually estimated fully is because it will grant a particular kind of space, and we are actually looking to build antibiotics. [indiscernible], we are looking to achieve all the move-on for needs. So we'll let you know, but I'm hoping that at least for the year-end, we should helpfully go.
In the medium and long term, what kind of implication can this have on your margins? Any broad range that you will share? What kind of savings can be generated?
Given that our warehouse now is at a 3% overall cost and manpower is a big part of the overall cost as we automated as we make it -- first of all, the whole purpose of automation is to also make the super engine to make sure that products are sent to us goes everything they did without taking great holidays and look on interest to mention that. So that, of course, will include the overall material. But we'll also be able to same in the range of, let's say, 0.7% on the prices. So I would say a 3% cost will probably end up coming some way to the point.
Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of the question-and-answer session. I would now like to hand the conference over to Mr. Madhukar Gangadi for those comments.
Thank you. I thank all participants on this call for their interest in MedPlus' journey. Our Investor Relations team can be contacted at ir@etsy.com for any questions. Thank you.
Thank you. Thank you. On behalf of MedPlus Health Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.