MedPlus Q1 Revenue Rises 22% but Margins Buckle Under Private-Label Slowdown
MedPlus Health Services, India’s second‑largest retail pharmacy chain, posted a 21.8% jump in consolidated revenue to ₹1,879.6 crore for the June 2026 quarter, powered by the addition of 146 net new stores—most of them franchisees. The growth, however, came at the cost of profitability: operating EBITDA fell 10.6% to ₹65.1 crore and the margin contracted 120 basis points to 3.5%, as the proportion of high‑margin private‑label products in the sales mix shrank and expenses rose faster than revenue. Net profit, at ₹33.2 crore, was down 21.7% year‑on‑year. The results, published on 21 July 2026, fell short of the company’s own operating plan—operating EBITDA achieved only 81.6% of target—even as revenue almost matched the internal goal.
Top‑Line Growth: Store Expansion Drives Revenue
MedPlus ended the quarter with 5,476 pharmacies—4,812 company‑owned (COCO) and 664 franchisee outlets. Of the 146 net additions, 131 were franchisees, underscoring the company’s deliberate push into an asset‑light model.
Revenue from the pharmacy segment, the dominant business, climbed 21.8% YoY to ₹1,839.9 crore. Breaking this down by product category, branded pharmaceuticals still commands the largest share at 68.8% of net sales, but it was the franchisee & B2B line that exploded, from ₹22.4 crore a year ago to ₹85.9 crore in Q1 FY27.
The growth wasn’t driven only by new doors. Same‑store sales for older stores remained robust: the cohort of 3,321 stores opened up to FY23 grew net revenue by 12.2% YoY, while the FY24 cohort (602 stores) posted 27% growth and the FY25 cohort (335 stores) a remarkable 45% growth. Even the FY26 cohort, which was barely present a year ago, contributed ₹102.5 crore—a 38‑fold increase from the tiny base of Q1 FY26.
Margin Pressure: Where It Hurts and Why
The pain point was gross margin. At the consolidated level, it dropped 160 bps to 24.5%. Within pharmacy, the gross margin contracted 170 bps to 23.3%. Management directly attributed the decline: 120 bps owed to a lower sales mix of private‑label products, and 50 bps to lower margin realized in the franchisee business.
Private‑label pharma, which carries a gross margin of 65–70%—vastly higher than the 13–14% on branded pharma—saw its share of net sales slip to 11.5% from 13.4% a year earlier and from 12.2% in the previous quarter. Private‑label non‑pharma rose year‑on‑year, but not enough to offset the pharma decline, leaving the combined private‑label mix at 21.6%, down from 22.5% in Q1 FY26.
The franchisee business, while accelerating revenue growth, generates a lower margin for MedPlus because the company sells product to franchisees at a wholesale rate rather than at retail. The ₹85.9 crore in franchisee & B2B revenue, up from ₹22.4 crore, diluted the overall margin profile of the pharmacy segment.
Meanwhile, expenses grew unevenly. Shop‑level costs (salaries, rent, others) rose 14.0% YoY to ₹269.6 crore—a slower pace than revenue—but other operating expenses jumped 34.3% to ₹125.6 crore, led by a 36.2% surge in PSD (warehouse and logistics costs) and a 19.0% increase in corporate overheads. This mismatch compressed operating EBITDA.
The diagnostics segment, though small, provided a silver lining. Revenue reached ₹37.1 crore (up 22.4% YoY), and center‑level EBITDA before central lab costs stood at ₹12.1 crore, a 32.1% increase, with the margin expanding to 32.6%. After all costs, operating EBITDA came at ₹6.6 crore with a 17.8% margin—well above the 13.6% of a year ago.
New Stores and SSSG: The Long Game
Because new stores typically lose money in their first few months, the ramp‑up profile of recent cohorts offers a roadmap for when the current crop might turn profitable.
The FY27 cohort of 112 stores earned an average monthly revenue of ₹29,707 in its first month and a store‑level EBITDA margin of -1.2% by month three. The FY26 cohort, now more seasoned, was already reaching a store‑level EBITDA margin of 6.3% at month twelve and 7.5% by month fifteen. This pattern—negative early, then gradually turning positive—is consistent with prior vintages, and management has consistently pointed to it as the natural curve for new pharmacy outlets.
Older stores, meanwhile, are the cash engines. The “Up to FY23” cohort alone generated ₹1,393.6 crore in revenue in the quarter and a store‑level EBITDA margin of 10.8%. It was these mature stores that kept overall pharmacy store‑level EBITDA at 9.7%, cushioning the operating margin.
Capex and the Road Ahead
Capital expenditure in Q1 FY27 was ₹33.8 crore, against a quarterly budget of ₹54.9 crore and a full‑year plan of ₹197.8 crore. The undershoot was concentrated in renovation and new warehouses, while maintenance capex actually exceeded plan.
MedPlus’s stated growth pillars remain unchanged—deeper store expansion beyond tier‑1 cities, widening the private‑label catalogue, and leveraging its omni‑channel platform. In previous calls, management had guided to 800 net new stores in FY27 and a modernization programme for 600 existing outlets to make space for more private‑label non‑pharma products. The Q1 actuals, with heavy franchisee additions and lower private‑label mix, suggest the strategy is working on volume but is yet to deliver on the margin‑recovery leg. Whether the new stores can mature into profitable contributors, and whether the private‑label mix can be nudged back toward 24–25% of sales, will determine when the operating line starts growing again.
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