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

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Earnings Conference Call for QMS Medical Allied Services Limited. The management will be sharing the key operating and financial highlights for the quarter ended June 30, 2026, followed by a question-and-answer session. Please note that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to the company's financial performance are available on the stock exchange and the company's website. Trust, you have been able to go through the same. [Operator Instructions] I now hand the conference over to Mr. Mahesh Makhija, Chairman and Managing Director. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. This is Mahesh Makhija, Chairman and Managing Director of QMS Medical Allied Services, and I'm delighted to welcome you all to the Quarter 1 FY '27 Earnings Conference Call of QMS Medical Allied Services. Our financial results and investor presentation has been uploaded on stock exchange as well as on our website. And I hope you had an opportunity to visit them. Joining me on our call today is Mr. Mohit Tamhankar, he is our Director of Compliance. It gives me immense pleasure to share our quarter 1 FY '27 performance [indiscernible]. This quarter marks a strong start to the new financial year and comes on the back of several important milestones of QMS. One of the key milestones was our successful migration of the SME platform to the main growth of NAC on June 18, 2026. This reflects the progress we have made over the years and reinforces our commitment to ending a larger, stronger and more diversified health care services platform. For the next few minutes, I'll take you through the industry landscape of our business performance and our financial results of Q1 FY '27. India entire industry continues to offer a strong long-term growth opportunities supported by rising healthcare awareness, healthy spending, expanding attests to health care and the rapid adoption of digital health solution. At the same time, the growing burden of chronic diseases and increasing treatment complexity advising greater focus on continued [indiscernible] average and indices. Against this backdrop, the patient service programs of PSC ecosystem is gaining increasing importance. Some of the business companies are increasingly moving beyond medicines towards more holistic patient-centric care. PSC typically focus on treatment, access, [indiscernible] adherence, disease management and on [indiscernible] engagements, particularly across chronic and specialty points. Indian pharmaceutical industry provides a large and expanding ecosystem of India is also a major global supplier of medicines upon around first of the global generic medicine supply. As pharmaceutical companies increasingly focused improving patient access, [indiscernible] and outcomes we expect demand for our integrated and technology-enabled PSC platform to continue growing. We believe that the combination of both the on-ground execution, digital engagement and data-driven patient support present some meaningful long-term opportunity for units. Coming to our performance, I'm pleased to report that we have started FY '27 on a strong growth. Our consolidated revenues from the operations stood at INR 56.9 crores, registering a 22% year-on-year growth. More importantly, our EBITDA grew faster than revenue, increasing 27% year on to INR 8.3 crores with the EBITDA margin improving 14.6% compared with 14.1% in Q1 FY '26 and 13.3% in the Q4 FY '26. PAT stood at around INR 4 crores, growing 25% year-on-year. While the [indiscernible] Have improved to 7%, the sequential performance is equally increasing. The revenue increased by 28%. Quarter 1 EBITDA grew by 41% and PAT more than doubled, increasing 110% over quarter 4 FY '26. I believe these numbers are particularly important because they demonstrate that the investments we made during the FY '26 [indiscernible] the infrastructure and service capabilities are now beginning to translate into a strong revenue growth and improved operational performance. As the business continues to result around two complementary pillars, product and services. Our Product business continued to see a healthy traction during the quarter across our healthcare and wellness portfolio, [indiscernible] devices. We are strengthening our presence across multiple channels, including the pharmaceutical companies, hospitals, clinics, [indiscernible] report, [indiscernible] and our digital platforms. Our expanding distribution network and a broad product portfolio basis a strong foundation to stand this business further. We will continue our focus on expanding our own brand portfolio, strengthening our distribution network and increasing our presence across our point of care and other health care segments. At the same time, our services business is emerging as an increasingly important [indiscernible] The business has been driven by a deeper pharmaceutical patois in giving adoption of business award programs and the growing scale of our health care camp operations. During our quarter 1 FY '27, our PSP business, including subsidiary, partly and sale generated approximately INR 17 crores of revenue. We currently hold a 76% stake in [indiscernible] Health care processing towards acquiring the remaining stake, which we expect to complete by the end of quarter 2 FY '27. This will further strengthen our capabilities in disease management and the patient support program, enabling us to address the patient journey in a more comprehensive manner. Today, our proprietary technology platform supports 100-plus programs and more than 1 million patients providing real brand tracking, monitoring, analytics and patient engagement capabilities. This combination of technology health care expertise and on-ground execution gives us the ability to manage [indiscernible] . Our B2B health care camps also continues to scale during this quarter. We are very pleased to announce that we have conducted more than 11,497 B2B health camps in the Quarter 1 FY '27 demonstrating the depth of our field execution capabilities and the trust based on us by our profitable factors. Importantly, we see CSP and healthcare camps as formulary capabilities and enable [indiscernible] awareness and early diagnosis while PSP grows us to engage that makes patients with treatment initiation, counseling, adherence and [indiscernible] and these management. Together, they allow QMS to participate across a much broader part out [indiscernible] Looking forward, our strategy remains focused on three [indiscernible] As cost scaling the service business, particularly special service programs by deepening admittance companies and expanding across the therapeutic areas. Second, expanding our product business led by [indiscernible] Point of paper issue and our broader distribution growth while the [indiscernible] our platform such as QMSMEDS and [indiscernible] . Leveraging technology across our health care ecosystem to reason engagement and core deliveries were scalable, able and data. We believe these initiatives position the QMS well to benefit from structural shift towards the pace centric and social business health care. Overall, I believe Q1 FY '27 refers on an important factor [indiscernible]. We have delivered a strong revenue growth, transfer EBITDA growth, improved margins and a healthy increase in profitability, while some continued to strengthen the underlying [indiscernible] of the business. More importantly, we started the on the [indiscernible] Made beginning to yield results in our product business goes to provide a strong foundation for [indiscernible] . Our ambition is to build QMS into a property and health care solutions platform, combining our medical products, patient engagement, technology and nationwide execution capabilities, while growing CSP opportunities and expanding pharmaceutical company based a strengthened service platform to [indiscernible] our established products and the contracts, we remain confident about the long-term growth opportunity ahead. I would like to thank our employees, customers, pharmaceutical partners, business associates shareholders for their continued trust and support. We remain focused on disciplined execution sustainable growth and creating a long-term value for our stakeholders. Thank you, and I look forward to discussing this. Thank you, guys.

[Operator Inructions] We take the first question from the line of Parth Soda from Trinetra Asset Managers.

So my first question is like devices is expected to improve margins and expand the portfolio. So what was the device revenue in Q1? And what revenue contribution are you targeting for FY '27?

See, Q devices, Quarter 1 revenue was approximately INR 3 crores. Okay. Last year, the entire financial year will be in INR 14 crores actually, okay? And we're looking at 10% to 15% contribution coming from Q devices. We are including a lot of point-of-care products, which are going to be a part of our new portfolio, which will happen -- we'll be setting this in the market by the first end of -- I mean by third quarter [indiscernible]. So just to add to that, also Q devices is a very important strategic initiative for us. As you can understand because it basically gives us help us opportunity to participate beyond pure distribution and give us greater control and product selection, quality, supply chain, while supporting our margins. So it will become as it has been in the past, an important asset for us as far as the strategic initiative is concerned.

Okay. Got it. And my second question is like Q1 had 11,497 camps and INR 13.7 crores in revenue, implying much higher revenue per [indiscernible] FY '26. How much of this improvement is due to higher value trends versus prices or patient linked billing?

From the financing listed correction, we are just uploading a revised file. The number of revenue actually for B2B camps is INR 6.4 crores, which was misprinted as INR 13.68 crores. So that is just getting rectified. And I would want Mahesh to answer, what's driving it.

So the question of driving is, again, the more therapeutic segment areas that we are entering actually right now. That's more important. So the more deeper we get into an organization, the more number of areas -- now with the GLP1 launch of GLP-1 or so. So that has also increased the business model right now. So we would like to look at the more different areas within the organization, the different therapeutic segments that where actually.

Just to add to that, as you can understand, [indiscernible] Can continue to be very important at the entry point of the [indiscernible] because the early screening, the early diagnosis is something that is also driven by Government of India. So we are actually helping through the pharmaceutical companies to the end-care patients to help diagnose the disease early so that they can be treated early and helps to reduce the complications like [indiscernible] , et cetera. While we improve on our execution because as you've seen that more than 11,500 camps, which is almost a 40% increase over the last quarter, we continue to be very positive to we have greater penetration in B2B camps in this fiscal year.

We take the next question from the line of Saket from Sagari Capital.

Sir, if I look at the Q4 commentary, the expectation was that we had hired employees upfront. So we were expecting some operating leverage coming from employee expenses. But instead, what we see is that employee expenses, whether sequentially, that is Q-o-Q has gone almost from, say, INR 5-odd crores to almost 10.5 -- sorry, almost INR 11 crores now -- from INR 5.7 crores has gone to INR 11.2 crores. And on a Y-o-Y basis, it is INR 3.5 crores. So instead of operating leverage, we are seeing much more increased expenses. So what explains that? Has the ESP, the [indiscernible] which was likely to kick off with Semaglutide getting launched in last week of March or so. So has that not picked up pace yet? And what explains even more additional employee expenses? So that's point one. And second, most of the margin. The margin has largely flattish, but the most of the, I would say, dip in or, say, negative impact of why expenses has been nullified by the increase in gross margin. So what is driving the gross margin? Is it driven from, say, low-cost inventory of products that we might be having or any price hikes that we had -- we might have taken in the sale of product portfolio? And third was that we were expecting that because the services portfolio is likely to be much higher margin around 25-odd percent. But even if I look at vis-a-vis [indiscernible] the contribution of services has gone up, but the margin hasn't really followed soon. So just thoughts on that, sir.

This is from the finance team. I'll answer your question about the employee cost. The employee cost has increased because of further hiring that we have for our PSCs. And that is reflecting and that cost has been compensated by the higher revenue of our PSPs. So in certain PSPs, we would have contractual employees, but some long-term PSPs has required us to hire employees on our payroll. So it's not that our employee costs have increased without the increase in the service revenue, the contracts that were supposed to start have already started in quarter 1. And the -- basically, it's [indiscernible] employees that are contributing to the [indiscernible] So that answers the question regarding the increase in employee cost. Can you repeat your next question?

Yes. So just again, as double flagging on the employee cost. So say, for example, last time we had said that it was upfront hiring, so which led to INR 5.7 odd crores of expenses. So what was the order book of PSP saying Q4 vis-a-vis, say, order book of PSPs in Q1? Because I'm assuming more hiring needs, the order book, [indiscernible] Of ontrack total contract value of PSCs might have gone up. So what is the trend as far as PSP.

So our DSPs are typically cost-plus contracts. So the employee cost plus the administration cost, last cost of other allied services are charged to the client, and we have a markup. And we typically work on an annual contract basis. So we would have a yearly contract, and that would get renewed towards the end of the year for the next year. So I am not able to [indiscernible] how can I calculate an order book for this, but these are typically a year a contracts, and we build based on actuals plus markups. And this year ...

We are then?

If you see the presentation, you see that our PSP revenue in Q1 is about INR 17 crores, it's actually INR 17.6 crores. And separately, our camp revenue is INR 6.4 crores. So you combine it to, that we have a INR 24 crores, INR 25 crores of service revenue in this quarter.

Okay. And is it safe to assume that it's -- because these are annual contracts or annual say, expectation from PSP will be more like INR 17.6 into 4, which is around INR 70-odd crores. Is that the run rate that we can look for this year? Or it might scale up? Is there a possibility of that?

It is based on the current contracts signed, you are correct, but we are also under negotiations for additional contracts. So as and when that happens, this number might go up based on the outcomes. However, for now, we can consider that. And we've guided approximately crores INR 90 crores to INR 100 crores of service revenue visibility for this year.

Okay. So thus, I think what was guided was that 25% is the EBITDA for services. So does that hold true for PSP also because if I'm not mistaken, so most of the cost that markup has 12% to 13% kind of markups. So is it like we are much higher?

So we have a higher margin in camps and a lower margin in PSPs and and the combined margins is what we estimate to be in 20% to 25 range.

There are a lot of PSPs basically starts from a camp point of view, that the program is fitted in that the there are a lot of camps which are taken into place and then the other factors also coming. So there is a combination basically or everything working on that [indiscernible]

Just to add just one point. In quarter 4, we also said that part of the program has been rolled out in quarter 1, the other part has been rolled out, and the few employees, which you see the increase in employee cost has been added. So more or less, you will see overall in last two quarters. This has already been taken into account. As far as longevity is concerned, in terms of [indiscernible] we already have said in the past that the stickiness of these projects, as our finance team mentioned is on a yearly basis. So we have typically yearly maybe 2 or 3 yearly contracts that are there. So we will have sustainability for the contracts over the long term.

So this INR 11-odd crores employee expense, is that a fair stable run rate? Or do we see further acceleration more order base or PHP contracts getting coming in? Is there a possibility?

We believe more or less, it will be a stable run rate. Having said that, it might increase if we have new projects, as you can understand, depending on the intensiveness of the project, whether it is steel driven or whether it is digital driven.

Or within the core existing projects, if the companies want to scale it up more, okay? They believe that they -- if they want to scale it up more, then there might be an increase on that.

Point, sir. And another question was that what explains the expansion in gross margins? Is it like low cost inventory or you have taken product price hikes, what explains that DME increase?

The margin increase is driven by the shift of our revenue from the revenue contribution, a higher contribution is coming from services. So that is a driver for the expansion of gross margins. Our margins in the product set are more or less stable as they were However, since -- if you see the contribution now a higher contribution of our revenue comes from services, and this is our strategic target, and we want to continue expanding that, that has driven the gross margins to be higher this quarter, and we expect that trend to continue for the full year. So if you see the quarter...

Sorry, just to add to that, if you see the quarter 1 last year versus quarter 1 this year, our services contribution to the total revenue has increased from 30% to 40%. And therefore, the margins have increased as well.

Got it. So what a now updated guidance for this year for the total top line was around INR 220-odd crores. But we already are sitting at INR 57-odd crores. So -- and we are usually extra heavy if I'm not mistaken, based on the earlier interactions. So what's the updated top line guidance now for FY '27?

We would want to maintain that guidance because we just finished quarter 1, we are in mid of quarter 2. In our experience in the way pharma cycle goes 1 out of the 4 quarters for some purpose for some reason or the other from a contract sort of [indiscernible]. So we would want to be conservative and maintain that guidance. Maybe when they are closer to Q2, Q3 is when we would be tempted to revise the guidance now. But this is too early in the year to revise the guidance.

We take the next question from the line of Nish Shah from Stella AMC.

So my first question is regarding the PSC side on PSP. So you mentioned that the PSP revenue was around INR 17 crores to INR 18-odd crores. So what do -- how should we think about the growth trajector programs going forward? And what is the current pipeline? You mentioned that some new contracts in the pipeline, if you could mention the amounting to [indiscernible]

Sure. So I think going by the current run rate, as I said earlier, that the quarter 4 what we have signed in terms of new agreements of PSP, is going to have its annual impact in this fiscal year at [indiscernible] We believe that the overall impact, including the current contracts that we have will lead us to about INR 90 crores to INR 95 crores in this year overall from the PSPs. And we believe that the additional PSCs that we were talking about will give us additional INR 5 crores to INR 7 crores. So our net overall contribution to the PSP with operations revenue, it will be around INR 100 crores to INR 105 crores in FY '27.

Okay, sir. And this includes Saarathi, correct?