Medplus Health Services Q4 FY26 Earnings Call: Guides 800 Net New Stores, EBITDA Margin Stabilizes at 5.8%

Medplus Health Services Ltd held its Q4 FY26 earnings call on May 20, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Headline Numbers & Segment Performance

• Consolidated revenue of Rs.18,644 millionin Q4 FY2025-2026, with pharmacy operations growing23.4% YoY.
• Operating EBITDA of Rs.1,076 million(5.8% margin) in Q4 FY2025-2026; pharmacy operating EBITDA stood atRs.1,022 million(5.6% margin).
• Diagnostics revenue of Rs.347.8 millionin Q4 FY2025-2026 (vs. Rs.280.8 million in Q4 FY2024-2025), with operating EBITDA ofRs.53.1 million(15.3% margin).
• Store network reached 5,330 storeswith 2.8 million+ sq ft at end of Q4 FY2025-2026, up from 4,712 stores and 2.4 million sq ft a year earlier; average store size is528 sq ft.
• Net store additions of 218in Q4 FY2025-2026 (295 opened, 77 closed, including 18 relocations and 13 franchise closures); FY2025-2026 full-year net additions reached618.
• Private label sales constituted 22%of total revenues in Q4 FY2025-2026 (11.4% pharma, 10.6% non-pharma).
• Corrected operating cash flow of Rs.4,956 millionfor FY2025-2026, with OCF / operating EBITDA ratio at135.5%; net working capital at53 days.

Network Growth, Franchise Economics & Strategy

• 618 net store additions in FY2025-2026; management guided for800 net new stores in FY2026-2027including franchise outlets, and800 new stores in FY2027-2028(company-owned and franchise).
• ~310 stores operated under franchise model in FY2025-2026; 13 franchisee stores were closed in Q4 FY2025-2026 due to unmet entrepreneur expectations and short-term experiments.
• MedPlus invests ~Rs.10 lakh per storefor complete capex (fit-outs) for new franchise outlets; franchisees purchase entire inventory upfront as an outright sale to MedPlus.
• MedPlus retains 9.5-10% gross marginfrom franchise sales (before 2.5-3% supply chain cost); franchisee receives 14-14.5% margin; the retained margin flows directly to EBITDA with no additional costs.
• Franchise stores are profitable from day one, unlike company-owned stores which incur first-year losses; management expects overall EBITDA to remain stable despite rising franchise mix, supported by higher private label penetration in franchise outlets.
• No new states immediately targetedfor franchise expansion; the model will be used for densification in existing states and recently entered states (MP, Chhattisgarh) where store feeding began in FY2025-2026.
• 26-27 underperforming stores closedin Q4 FY2025-2026 (operating >3 years, unable to revive to expectations), alongside 13 franchise closures.

Private Label Mix, Margin Impact & Growth Approach

• Private label sales at 22-23% of total sales(Q4 FY2025-2026: 11.4% pharma, 10.6% non-pharma); management does not provide quarterly private label growth guidance.
• Private label share "significantly declined" in Q4 FY2025-2026due to restructuring of sales incentives and rebalancing branded vs. private label products; the prior guidance of20-30 bps QoQ increase remains intact, with a return to trajectory expected inFY2026-2027.
• Every 0.3% growth in private label shareyields a0.1% impact on gross margin(prior guidance reiterated); improvements in private label are accretive to gross margins.
• Private label non-pharma margins: 23-25%; branded non-pharma margins: 9-10%; private label pharma commands "much higher" margins than private label non-pharma.
• Balanced growth strategy— management will not aggressively push only private label, aiming to maintain multi-brand retail status and offer full branded product range, based on learnings from FY2024-2025 and FY2025-2026.
• Entire inventory risk (expiry, write-off) for private label productsis borne by the company; contract manufacturers are used for both pharma and non-pharma where internal capacity is unavailable.
• Backward integration underwayvia Optival unit for own-brand food items and select non-pharma products (e.g., cleaning liquids, toilet items); management is open to expanding in-house manufacturing but will not manufacture "all."

Margin Structure, Mature Store Economics & Cost Profile

• Gross margin closed at 26% for FY2025-2026; EBITDA margin at 8.8% for FY2025-2026; operating EBITDA margin of 5.8% in Q4 FY2025-2026.
• 30 bps sequential gross margin improvement in Q4 FY2025-2026driven by higher other income and pharma membership income, including supplier contract benefits accrued on units sold during the year.
• Mature stores (>12 months) generated Rs.16,606 millionin Q4 FY2025-2026 (96% of pharmacy revenue) with a store-level EBITDA margin of13.1%; stores >24 months delivered13.3%, and stores 13-24 months delivered9.3%.
• COCO stores have a gross margin of 24%and company-level store EBITDA of 11% for FY2025-2026; franchise sales yield 9-10% gross margin before 2.5-3% supply chain costs.
• Store-level EBITDA margin for 12-month+ storesimproved from5.8% in Q4 FY2025-2026 to 6.7% in Q1 FY2026-2027, with no one-off factors cited.
• Zero debt company— management confirmed Rs.120 crore interest in FY2025-2026 P&L is entirely lease-related under Ind AS; the company hasno external loans.
• Returns to pharma companies are <1% of sales value; reimbursement for up to 95% of value is received within less than a month, primarily for branded product expiry.

FY2026-2027 Outlook, Priorities & Capital Allocation

• 800 net new stores targeted for FY2026-2027(including franchise outlets), and800 new stores for FY2027-2028(company-owned and franchise); store modernization project underway in FY2026-2027 to upgrade600+ storeswith smart storage and optimized rack systems.
• SSSG target of 9-10% annualized for FY2026-2027(mature stores >12 months grew 17.8% in FY2025-2026); management noted SSSG is "not the only metric to track for a pharmacy setup."
• Operating EBITDA margin to stabilize at 5.7-5.8% for FY2026-2027, with plans for subsequent growth; gross margin guidance is tomaintain current levelsfor FY2026-2027.
• Priority on first maintaining current profitability(Q4 FY2025-2026 levels) then continuing to grow (FY2026-2027 onwards); management does not provide formal financial guidance but expects revenue and margin growth to continue in the "same manner."
• Capital allocation remains dynamic, focused on adding value through products, assortment, and supply chain reliability, with a preference for contract manufacturing for private labels; no dividends are planned given "huge headroom" for growth investments.
• Online sales (~5%+ of total sales in FY2025-2026)positioned as "additional convenience" only in pin codes where physical stores exist; expansion continues inTier 2 and Tier 3 townsfor physical presence.
• Warehouse inventory target of 30-33 days; management plans to reduce tail brands (currently >200 brands per molecule) to lower inventory days if private label penetration reaches40-40 plus percent.