Thyrocare Technologies has seen a 44 percent decline in share price so far in 2022. Find out the likely causes of the stock’s decline. Every industry has been impacted by Covid-19 over the last two years. Many were depressed, and even stocks with solid fundamentals experienced declines.
However, a few industries reported an uptick in business. Once the tide shifted, those stocks ended up being multibaggers. The diagnostic industry was one such sector.
Earnings for these stocks fell precipitously during the initial Covid-19 wave. However, the second and third COVID waves brought to a huge increase in revenue and worth for the sector.
Diagnostic stocks benefited the most as Covid testing and other tests grew as people’s awareness of their health improved.
However, the sector’s fortunes have declined since the start of 2022. This sector’s stock performance has decreased by more than 50%. The share prices of every company have fallen precipitously. Thyrocare Technologies, the longest-listed pathology firm in India, has had a 44 percent decrease so far in 2022.
Why have Thyrocare shares nearly fallen in half in 2022?
The company’s declining PE multiple may be the main cause of Thyrocare’s fall.
The company experienced a PE multiple of 43x in March 2021. This was greater than the 33 percent three-year PE multiple average. The demand for Covid testing and the rising cost of healthcare were the main contributors to this high PE ratio. The pathology firms’ share prices increased several times over as a result. Those gains have started to diminish as Covid cases ease and countries reopen. This is as a result of the decline in demand for Covid testing.
As a result, Thyrocare’s net sales decreased 11.1 percent year over year to 130.6 crore from 146.8 crore in the March 2022 quarter.
The company’s operating profit decreased by 27.9% year over year to Rs. 39.7 crore.
The PE multiple has dropped to 18x as a result of the profit decline.
As can be observed, the impact of Omicron led-wave on non-Covid business weighed on the operational performance of diagnostic companies in the March quarter. This even substantially damaged Dr. Lal PathLabs.
The fierce rivalry and difficulties associated with consolidation are another factor contributing to the pressure on the stocks in the diagnostics sector.
Recently, the platform Tata 1mg, which is owned by the Tata Group, announced the trial launch of important laboratory tests in Bengaluru. It offers testing for as little as 100. Compared to what Thyrocare and Lal PathLabs are charging, this comes at a fairly modest rate. These were the two main causes of the decline in Thyrocare’s share price. Promoter pledging is another possible explanation.
While promoter pledging isn’t necessarily a bad thing, many people view it as a warning indicator. The promoters of Thyrocare pledged all of their holdings in the September 2021 quarter. Promoter pledge is currently at 100 percent.
Thyrocare Technologies recently announced that company had discontinued making investments in the business-to-customer market. It is concentrating on expanding its primary business, which is serving online health platforms as a backend testing platform, including its parent company PharmEasy, franchisees, physicians, and hospitals.
Tanushree Banerjee was also contacted to get her opinion on stocks in the diagnostic sector.
The likelihood of maintaining profits appeared dimmer in recent quarters as the demand for Covid testing decreased and numerous mew diagnostic businesses went public. Cutthroat pricing by VC-funded diagnostic firms and online pharmacies also posed a threat to the market giants.
The worries aren’t completely unjustified. The market leaders may need some time to regain their market share without sacrificing profitability. Stocks throughout the industry have returned to lows that are close to 2020 as a result of the market’s dramatic reaction to such near-term fears.
There is a bright spot for long-term investors, though.
Businesses with a global reach and a keen understanding of technology might take advantage of the chance to grow their operations amid the crisis. How recently have shares of Thyrocare Technologies performed? Shares of Thyrocare have decreased by more than 40% so far in 2022. The stock’s 52-week high was $1,374.9 on August 13, 2021, and its 52-week low was $603 this week on July 21, 2022.
Concerning Thyrocare Technologies
An Indian international network of diagnostic and preventative care facilities is called Thyrocare Technologies Limited.
One of the top diagnostic chains operating across all of India, the business offers a wide range of medical diagnostic procedures.
A controlling 66.1 percent stake in the business was acquired by API Holdings, the parent firm of Indian E-pharmacy and online healthcare aggregator PharmEasy.