1、EQUITY:HEALTH CARE&PHARMACEUTICALSMedplus Health Services MEDP.NS MEDPLUS INGlobal Markets Research30 May 2025Step-up in private label contributionGross margin improved,but volume growth has slowed4QFY25 marked a step-up in private label contributionPrivate label contribution was at 23.3%of sales in

2、 4QFY25,up from 19.6%in 3QFY25 and 15.2%in 4QFY24.Since pharma private labels are sold at a material discount to branded products,we estimate that more than a third of pharmacy sales in 4QFY25 were from private label products.This includes 20%+of GMV from pharma private label products up from 13%in

3、4QFY24.This led to significant expansion of gross margins,up 400bp y-y.Pharmacy employees are significantly incentivised for private label sales,which is at 8%/4%for pharma/non-pharma products,respectively,we estimate.This is also reflected in employee cost increasing 22%y-y in 4QFY25,with just a 1%

4、rise in revenue.Pharmacy GMV growth,however,slowed down to just 6.2%in 4QFY24 down from 27.4%in 4QFY24.In our assessment and based on management comments,we think the slowdown can be attributed to:1)execution challenges with higher volumes.The company has expanded its warehouse network to improve su

5、pplies;2)introduction of low-cost private labels in FY24 attracted large volume of new value-seeking customers that led to a large base.The growth of private labels is now primarily driven by switching from branded pharma prescriptions,in our view,and;3)low rate of new store additions.We expect that

6、 with a higher intensity of new store additions(management expects to add 600+new stores vs 305 in FY24)and normalisation of the base,GMV growth should improve,particularly in FY27F.We expect the strong traction in private labels to sustain.The volume growth in Jan Aushadhi and Dava India are indica