The non-COVID business in Q2 FY21 tracked close to last year levels on a Y-O-Y basis
Diagnostic sector companies have posted encouraging results for Q2 FY21. There has been consistent improvement in business across Dr Lal PathLabs, Metropolis, SRL Diagnostics and Thyrocare.
The non-COVID business in Q2 FY21 tracked close to last year levels on a Y-O-Y basis where Dr Lal PathLabs’ business was at 95 per cent; Metropolis at 85 per cent; SRL at 75 per cent (relatively lower recovery possibly due to higher contribution of radiology) and Thyrocare at 90 per cent.
During the last month of the quarter i.e. September 20, non-COVID revenue recovered to September 2019 levels for most of the chains. This trend has continued/accelerated in October for all the chains where Dr Lal PathLabs posted ~100 per cent; Metropolis: 106 per cent; SRL: ~90 per cent and Thyrocare ~100 per cent growth.
According to a report in VC Circle, the extent of recovery in the non-COVID business in the quarter is a bit less promising at ~65 per cent. That said, in general, barring another COVID shock/wave, companies believe that the directional impact of ‘COVID on non-COVID’ in diagnostics is certainly behind.
B2B business, home collections, franchisee/collection centre/pick-up point led business etc. have mainly driven this recovery – walk-in business’ recovery is the least. Not much data is available for radiology recovery and it is much lower (as evidenced by SRL numbers). Ballpark estimates suggest only a 50-55 per cent recovery levels in Q2 FY21 for radiology.
As one would expect intuitively, the significant ramp-up in the home collection revenue was for both during the COVID and non-COVID tenure. This is expected to be an important pivot of the business in the medium term. (e.g. Metropolis scaling this up from nine locations to 65 locations by the end of December 20). Ballpark estimates of home collection revenues for Dr Lal PathLabs: ~10 per cent from ~5 per cent (of overall revenues) Metropolis: ~20 per cent from ~15 per cent.
The volume growth was much lower though in terms of the number of tests/number of patients (inclusive of COVID). However, the good part of the news is that volumes have recovered in most cases to pre-COVID levels (except for SRL).
Most of the larger chains are focussed on regaining the base non-COVID business and do not view the COVID testing particularly as a long-term strategic driver of the business. However, saying that the consensus is that the COVID opportunity is still very much alive and will definitely continue for a few quarters though the extent remains unpredictable. Given the specialised nature of the COVID business, larger players/ regional leaders would be better placed to exploit this opportunity.
The chains have invested in infrastructure and building capabilities for COVID e.g. Dr Lal PathLabs – nine labs, SRL – 10 labs and Thyrocare – two labs can do COVID testing.
