Thyrocare Technologies up 7% as board mulls share buyback proposal

Thus far in the calendar year 2018, Thyrocare had underperformed the market by falling 14% as compared to 8.6% rise in the S&P BSE Sensex till Friday.

Thyrocare Technologies was trading 7% higher at Rs 633 on the BSE, after the company that its board will meet on August 04, 2018, to consider a proposal to buy back equity shares.

“The meeting will also discuss about postponing the 18th Annual General Meeting convened to be held on August 11, 2018 to a later date, to enable the shareholders to consider the aforesaid proposal, too,” Thyrocare Technologies said in a BSE filing.

The primary objective of a share buyback programme is to arrest the fall in the value of a stock by reducing the supply of the stock, which essentially pushes up the share price through a better P/E multiple. The other objective is to improve earnings per share (since the same dividend amount is now distributed among fewer shares).

The stock of healthcare services hit a 52-week low of Rs 548 on July 17, 2018 in intra-day trade. Thus far in the calendar year 2018, it had underperformed the market by falling 14% as compared to 8.6% rise in the S&P BSE Sensex till Friday.

Thyrocare Technologies had made a strong market debut by listing at Rs 618, a 39% premium against its issue price of Rs 446 per share on May 9, 2016. Since its listing, the stock touched an all-time high of Rs 780 (April 6, 2017) and a low of Rs 524 (June 24, 2016) on the BSE in intra-day trade.

Analysts at Prabhudas Lilladher expect Thyrocare to achieve 20% growth in revenue and 35% EBITDA margins in FY19E.

“Management guided that lower rationalisations and advertisement (guided at 4‐5% of sales) costs will impact EBITDA margin by 400‐500bps. While management maintains its guidance of 25% (+/‐2%) sustainable annual growth, we have become more conservative and expect revenues to grow at 20% and 21% in FY19E and FY20E,” the brokerage firm said Q4FY18 result update.

“We believe that the increased promotion expense will not immediately benefit in higher than expected growth in revenues. We expect benefits of lower price and promotions to be realised with lag effect and may have a J‐curve impact on EBITDA margins,” it added.