QMS Medical Allied Services Limited (QMSMEDI) Earnings Call Transcript & Summary

Ladies and gentlemen, a very good evening, and welcome to the earnings conference call of QMS Medical Allied Services Limited for Q2 and H1 FY '25. We have with us today Mr. Mahesh Makhija, Founder, Chairman and Managing Director of QMS Medical Allied Services Limited; and Mr. Tanay Surkund, Head of Institutional Business and Special Projects at QMS Medical Allied Services Limited. [Operator Instructions] I would now like to hand over the conference to Mr. Mahesh Makhija, Founder, Chairman and Managing Director of QMS Medical Allied Services Limited to give his opening remarks. Thank you, and over to you, sir.

Thank you. Good evening, everyone. Thank you for taking the time to participate in this conference call. Before answering your questions, like as usual, I would always like to give everyone a brief journey of our company and financial and operational performance during Q2 FY '25 and our present growth vision. As you know, we've had QMS Medical Allied Services as a holistic health care engagement solution company. We have been listed on the NSE since October 22, 2022, headquartered in Mumbai, obviously, as we said, and we command over 3 decades of experience driving engagements for doctors, patients on behalf of marquee pharma companies. We have accomplished more than almost around 350 people servicing over 130-plus institutional clients, including the top 50 pharma companies across catering to more than 5,000 pin codes across India. Over the years, we have diversified our business to include product vertical, including our own brand Q Devices, our solution vertical, our Genesis license offering high-quality wide range of products, 900-plus SKUs from long-standing device manufacturers worldwide on behalf of our pharma clients such as 3M, [indiscernible] BPL overall. We also offer products under our brand name Q Devices. Just a couple days starts [indiscernible] as our brand ambassador. This business remains relevant, and we have extended our capability to build new hospital supplies business, which I will touch upon later. The solution verticals offers customized patient services or outreach programs, including end-to-end management and reporting. Our USP consists of accountability, efficiency, innovation and compliance. We conduct preventive screening camps with health care practitioners, clinics and our pharmaceutical clients to promote early disease detection and intervention. Today, we have a network of more than 900-plus [indiscernible] networks, 135 trained and certified DMLT, medical technology guys, each with advanced diagnostic devices and an area covering more than 35-kilometer radius from the station location, which empowers us more than 10,000 patients actually every month right now. Coming to Q2 FY '25, the quarter picked up well after the election year of first quarter. Despite the monsoons, the business visibility remained robust, mainly due to our long-term client agreements and with the government proactive focus on the sector reflected in key policy clarifications. We continued focusing on high-margin solutions based outreach, which we reflected in a substantial numbers. In the past quarter, the company acquired a 51% stake in Saarathi Healthcare, a pioneer in patient and disease management services, market access and physical solutions. Over the past 15 years, we have managed more than 1,000 projects in partnership with over [ 68 ] enterprise clients. During the first quarter after the acquisition of Saarathi, [indiscernible] continue consolidating operations and exploring higher synergies. Saarathi Healthcare executions bolstered the companies growth on a consolidated basis. We also [indiscernible] into hospital supplies at tech industry, we see a great potential. We have commenced supply of [indiscernible] in the hospitals and Indore, Madhya Pradesh and also started operations in our Ahmedabad also right now Gujarat. Coming to the quarter and the half yearly performances now. On a consolidated basis, the company posted an operating revenue of INR 37.2 crores for Q2 FY '25 compared to Q1 '25 EBITDA grew by 52.9% to INR 7.57 crores in Q2 FY '25. The company's net profit stood at INR 4.23 crores in Q2 FY '25, up by 76.3% from INR 2.4 crores in Q1 FY '25. Our margins at EBITDA and PAT levels for Q2 FY '25 stood at 20.3% and 11.3%, respectively, posting a marked improvement over previous quarters. On a year-on-year basis, the company's operating income improved by 30% while our EBITDA clocked a 51% jump in Q2 FY '25 compared to Q2 FY '24. On a stand-alone basis, the company posted operating revenue of INR 32.74 crores and a PAT of INR 2.61 crores for Q2 FY '25. The EBITDA stood at INR 5.42 crores, translating into an EBITDA margin of 16.5%. Coming to our half yearly numbers, operating revenues in H1 FY '25 were at par those in H2 FY '24, accounting for 55% of FY '24. However, EBITDA increased by 38% over H2 FY '24 and 28% over H1 FY '22. The EPS for H1 FY '24 stood at INR 3.27 and accounted for 65% of the annual FY '24 numbers, reflecting a consistent performance. Going forward, we at QMS will continue to pursue a higher share of solution focused businesses and implement sustained cost reduction strategies aiming for a robust margin. I would now like to request questions from the participants.

[Operator Instructions] You first question from the line of [ Shantanu Nakare ] of Value Educator.

My first question is, sir, what was the revenue and the net profit contribution from the Saarathi in this quarter?

Saarathi's revenue was approximately INR 5-odd crores for this quarter.

Okay. And the net profit?

Loss was approximately INR 1.75 crores.

Okay. And sir, next question is like how much camps are we expecting to achieve by FY '25? I think last year, we did around 25,000 camps.

We are right now growing at almost 35% right now. I have the exact figures right I can share it with you at this moment right now. 1 minute.

Okay. So we can expect a 35% on 25,000 camps that way?

Easily. Easily. Right now, we are growing -- we have almost crossed more than 17,000 -- 18,000 camps already right now.

Okay. Sir, any plans for increasing the wallet share from the existing customers?

See, we are existing customers, definitely, we just attended our program right now, our SSI right now just 2 days back actually when we have participated as well, company, first time [indiscernible] together actually, showcasing our product range also as well as our services category also right now. And we will probably be doing the same conference participation in the TSI also right now. We are approaching a number of pharma companies, the insurance companies right now for both for our product services businesses as well as our service business right now.

Sir, my last question, if you allow. Any light on the hospital business? Like how much are we expecting from the hospital business in this financial year?

See, we have budgeted a rough figure of almost around INR 25 crores to INR 28 crores approximately in this financial year in the hospital business right now. We have just entered, right now, with 1 product, 1 or 2 products right now, and we are taking up a lot of finalizations are happening right now because of this, since we entered the business right now, we are just setting up, we are opening offices in Ahmedabad. We opened office in Ahmedabad. We opened office in Indore. There are 7 other state offices that we are undergoing at this moment. We have tied up with the agencies who are going to handle our [indiscernible] at place. Our GST numbers are under process in Kolkata, in Chennai, in Bangalore.

So we have in all over the country, we're going to have pan-India coverage for the hospital business. However, right now is the setup stage, as Mahesh clearly put it, we are in the -- because we are selling medical devices. So medical devices require a certain amount of regulation and licenses to run. So we are in the process now, acquiring those licenses for the locations we've identified. So the minute we have those licenses in place, parallelly, our sales forces will be recruited, therapy-specific sales forces will be recruited, and we'll be in action even before the start of the next fiscal.

Okay. So what will be the guidance for FY '25? Are we in a track to achieve INR 20 crores to INR 22 crores of net profit by FY '25?

See, numbers-wise, we are definitely going to grow. Net profit upon that, we would be probably able to tell you soon on that.

We can say that we will most likely reach double digits. But the number you're stating is something that is, as we say, still aspirational. We are aiming -- we are going towards that number, but we can't give you a guarantee that we'll reach it in the next year. But we are definitely on the same -- we are definitely on the path to get to that number in net profit.

We'll take our next question from the line of Rahil Shah from Crown Capital.

Yes. Sir, just I'm pretty new to your company, and this is the first con call I'm attending. I just -- so I understand you sell medical devices. But if you can also highlight what exactly is the moat for the business -- for our business, and the key growth strategies your people are working on, which will help the business going ahead?

Okay. Which -- are you talking about any vertical in particular, sir, you're looking at the company as a whole?

So if you could highlight a few details about each vertical and which is the best seller for us and...

I'll answer your question, sir. Traditionally, we have basically the product vertical as well as the service vertical right now. Year 2017, we were purely a product business actually -- our business was more to the B2B side of our business, catering to the sales promotion activities of the pharmaceutical companies. We were the first company probably in this country to follow the international pharma ethical code of conduct, marketing code of conduct [indiscernible] products which are used by the doctors in practice on the patients are supposed to be good promotion products actually. So we are the first company technically to start this concept 30 years back actually. So since 2017, we were purely a product business actually, having medical equipment to giving to the pharma companies back then. Post that, we entered into service regulations where we entered scientific education content, providing education contents from different institutions. We had a tie-up with our agency who was based in Scotland, EC, which used to get us contents from different in like [ RCC ], Birmingham University, ESP, all the top institutes like that. So we used to sell that also. Post that, we entered into the camps models actually, where we are conducting camps the servicing, which we are conducting camps in the doctor clinics actually. To enhance to that to monitor the patient journey, we are right now where the 51% stake is growing, where we are in a position to monitor the patient journey throughout the treatment post diagnosis of a lot of other stuff that way. And during that time, during this vertical also, we have launched our own in-house brand called Q Devices, where we have Mr. [indiscernible] on the brand right now with us for the last 2 years right now. That is the sector -- also, right now this quarter, we have started that venture into the hospital business for the product side. So technically speaking, we are a company divided into 2 verticals each -- and among each vertical, there are 2 different products. On our own brands, one B2B brands, one is the hospital brand. From the services point of view, have [ CAs ] and we have patient service group. I hope I am able to answer you.

No, no. I was just saying, so this hospital business is pretty new, right, which you've just entered.

Yes, pretty new. Absolutely, new, just 2 months old right now.

Okay. What exactly do we do there?

Sir, like the name such as hospital business right now, we have products which we are going to give it to the hospitals going to use it to them. I mean we'll be supplying them to the hospital. So we are having -- we are setting up a full holistic approach right now where we are in a position to stock and sell the products for the different health care company and give it to the hospitals. And majority of these companies, which we are already working with them right now through the B2B sales business of us to the pharma companies. Now we are entering with these companies into the hospital sector.

Right, right. And do they offer better margins to us?

The margins are almost similar to B2B business. So the margins are almost the same actually. But as I say, the services industry offers a better margin than the product. But when in product, if you include better service along with them, then you can able to increase the margin. So like if you -- not only just -- if you don't become a normal run of the mill type of a dealer where you are just going and supplying the material, then your margins are different. But if you are in a position to help these companies get the business, have the network, have your own team of people going and closing the business for them and then supplying that, that's where you get the actual margin. So what you're trying to become is a complete health care solution provider for the principals also, not only for the patients, not only for the hospital, but even for the principals also. So that's where your margins are. That's where we are -- that's how we are opening up different offices in different areas and having different people out there. So you're not just ending up going to be a billing provider or just build the material to the hospital and move out, not that. We're going to see -- our own people are going to get the business. Our own people are going to go and help then close the deals and supply that. That's the complete loop.

In a nutshell, what the hospital business is going to follow a value-added distribution model. So it's beyond simply order fulfillment and logistics supply. We will be creating sales. We'll be aiding in the marketing of the products and the scientific marketing of the products to the users and to the hospital and the institutions as a whole. I hope that answers your question, yes.

Yes. And just lastly now, so you've explained in detail about all these verticals, which are divided into 2 main categories now. And I understand like some of them are new and you're in growth mode. But it's still internally as a company, you would have some aspiration set or certain target set in terms of growth. So can you just highlight that for us as a certain percentage for the next 2 to 3 years, what kind of company -- what is achievable, what is capable?

See, we are planning to combine our services businesses, what [ PI ], [ GMSS ]. In 3 years, we want to double that business right now for us, okay? So that is there right now actually. So we'll be combining that the hospital segment also will set up -- at least the current turnover what we are doing right now in the total turnover of actually. That is a number more than that is what we are planning for next year actually from the hospital segment because the hospital business is a big high-volume business right now. And whatever B2B businesses which we are doing right now will grow at the standard 7% to 8% margins running business right now, margin business, 7% to 8% yearly growth actually.

Okay. Okay. And are these 15% margins sustainable?

It's been doing for the last 30 years, sir.

If you'd like a little bit more detail on that, the services profile of our business is a very high-margin play. The products, however, depending on -- and especially, I would say, in the hospital business, depending on the volume of the products that are sold and the type of products that's sold, there is a differential margin -- a differential difference in margin. For example, if you are selling syringes and needles, the margin will, of course, be lower. But if you're selling a device like an infusion pump or something of a higher quality, then you -- of course, the margin will be higher. So there is that difference.

As Tanay suggested, value-added services, what we are able to give to their customers, that's where you're going to get your margins. If you're just going to be a distribution model company, you are never going to get that type of margins, which we have never been that for the last year. Even with our B2B businesses also, we've been always a solution provider actually from that some value-added services in some form or the other.

Okay. Okay, sir. And just lastly, just reconfirming, you earlier mentioned you would like to double your business in 3 years. Did I hear you correctly?

Yes.

[Operator Instructions] Yes. Next question is from the line of Shah, an individual investor.

So can you please explain what kind of business synergies would QMS and Saarathi have together? Also, it would be great if you can give some flavor on the kind of performance that we can expect from the combined entity?

Okay. See, when we were conducting the model of QMS, as I said, we are basically a device company actually [indiscernible]. So we have products basically which we used to go conduct camps in the doctor's clinics and we used to identify the patient at disease level, okay? Now what Saarathi does basically is what happens after you identify the patient. We pass on the lead to the company, we give them to them. Obviously, the company would like to do -- the doctor would like to manage these patients in a better way. What Saarathi used to do is basically provide end-to-end solution on patient management. So combined synergy of identifying, diagnosing that and then complete passing on the lead and completing that loop of managing the patient journey throughout how giving him an educating if he's being diagnosed with IB, if he's being diagnosed with breast cancer, he or she is being diagnosed with the breast cancer saying [indiscernible] diagnosed with another form of kidney problems and all this. So the dosage form, the other lifestyle forms, what should be done, it's a combination of both. So what QMS [indiscernible] combined together will be that actually. So what you are providing to the doctor as well as to the pharma company a total complete end-to-end package.

Ms. Shah, does that answer your question?

Yes.

[Operator Instructions] We have a question from the line of Shantanu, Value Educator.

So what is the update on the medical device segment from the online platform?

Could you repeat that, sir? It wasn't very clear.

So what is the update on the medical devices segment from the online platform?

So on the online platform, we are seeing a marked growth in our own brand of Q Devices, which is happening through our own marketing efforts. We're also now increasing our distribution touch points across the country so that we can fulfill better delivery times to our customers. As you know, online, if anything -- if everyone wants immediacy and with the advent of hyper local dispatch centers through Zeo and Swiggy where everything is available to you even quicker than going to a store, it's incumbent on us to also kind of start creating those models. So we are tying up with these kind of delivery couriers. We're tying up with these kind of companies as long as the traditional e-commerce platforms like Amazon, [ JioMart ] and all to grow significantly. That being said, we have already crossed last year's sales numbers this year because we have been working with brands like Omron, who we didn't have last year, and we've hit significant numbers because of that. We are also now adding more and more products to our own range, and there are other brands who -- health and wellness brands who see potential in working with us. And we are now working out deals to finalize their participation in our e-commerce business as well. So this is -- this division is also a fast-growing vertical. It's being run by Dr. Diti Masija, who personally validates each business and each product and each brand to ensure that they fit into our broad vision of health and wellness.

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Tanay Surkund, Head of Institutional Business and Special Projects at QMS Medical Allied Services Limited for closing comments. Over to you, sir.

Thank you so much. Thank you, everybody, for attending the call. We're very, very happy that we got to showcase our quarter and our results. As you can see, we are on a growth trajectory. We are getting closer and closer to the targets that we have kept for this coming year. And we are also developing infrastructure, developing resources and developing workforce to hit our 3-year and 5-year targets, which we have planned in all our service areas. Our 5 business units currently are growing at the rate at which we have predicted, some even surpassing our expectations. And we have key strategies in place to ensure that everything is working as per our broader vision. So thank you very much, and I hand it over to you.

Thank you, sir. Ladies and gentlemen, on behalf of QMS Medical Allied Services Limited, that concludes today's session. If there are any questions that have remained unanswered, request you to kindly send us the same to [email protected]. Thank you for your participation. You may now disconnect the call.

Thank you.

Thank you.