Investing in these stocks can help you tackle COVID-19 treatment cost

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The second wave of COVID-19 is rattling everyone as India recorded the highest single-day addition of over 3 lakh Covid cases on April 22. With the widespread of the virus, the government has ramped up daily testing rapidly to over 15 lakh tests per day. This has made the dynamics of the Indian diagnostics industry attractive and betting on this sector can be your hedge against any probable COVID-19 related treatment expenses.

“The Indian diagnostics industry offers consistent, long-term growth potential of 11-12% and national diagnostic chains would continue to outperform industry growth. Given increasing health awareness post-Covid, a higher share of wellness, specialized and home collection segment will continue to aid realizations,” said Rahul Jeewani of IIFL Securities.

The brokerage house is bullish on Metropolis and Thyrocare as according to its analysis of the U.S. diagnostics industry suggests that margin pressures led by increasing competitive intensity from hospital-based labs and pricing cuts might be necessary to accelerate the consolidation trend.

Metropolis Healthcare | Price Target – Rs 3,050 | Upside – 23%

“Metropolis’ asset-light model of network expansion has enabled it to create a strong B2C pathology franchise within its focus cities, with its overall B2C revenue growing at ~20% CAGR (compounded annual growth rate) over FY16-20. The B2C growth momentum will sustain as Metropolis’ young service network provides sufficient headroom for growth, which will be complemented by the Hitech acquisition and efforts to expand in non-core markets & seeding cities through Covid and specialized tests. Metropolis is also likely to lead the consolidation wave in the diagnostics industry, as the Hitech deal demonstrates company’s aggressive appetite for inorganic growth. Expect 21% revenue and 20% EPS CAGR for Metropolis over FY21-23,” said IIFL Securities in a note.

Thyrocare Tech | Price Target – Rs 1,250 | Upside – 19%

“Thyrocare’s strong B2B model and industry leadership in wellness testing allows it to process high volumes of routine tests which, along with lower sample acquisition costs, drive significant operational efficiencies and 40% margins for Thyrocare. While its revenue growth had slowed during FY17-20. Management is striving to drive improved accessibility for the brand by doubling its network of regional labs & branded collection centers by FY22 and via focusing on new growth verticals within B2B. Expect 12% revenue and 23% EPS CAGR for Thyrocare over FY21-23,” added the note.

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