Digital Healthcare Distribution Will Transform India's Market Landscape

Key Takeaways

• Sastasundar Ventures is poised for revenue growth through an innovative digital healthcare ecosystem in India, emphasizing profitability and sustainability.
  
• Enhanced procurement and working capital efficiency are set to improve margins, boosting future earnings and shareholder value.
  
• The company's digital distribution model and expansion into new verticals face profitability challenges, with minimal EBITDA and competitive market pressures threatening future revenue and growth.

Catalysts

Operates a digital network of healthcare and portfolio management services in India.

• Sastasundar Ventures is focused on building the largest digital distribution ecosystem in healthcare in India, emphasizing innovation, profitability, and economic sustainability, which is expected to drive significant future revenue growth.
  
• The company's gross margin has improved due to efficiencies and is expected to remain stable or improve as they negotiate better procurement terms, likely enhancing net margins and overall profitability in future periods.
  
• Sastasundar Ventures is targeting a high return on capital employed by optimizing their digital business model, which can positively impact earnings and shareholder value.
  
• RetailerShakti has demonstrated robust growth, more than doubling their revenue, and Sastasundar Ventures is optimistic about its profitability and cash flow, which are expected to improve within the next year, enhancing future cash earnings.
  
• The ongoing improvement in working capital efficiency and inventory management, bolstered by technology-driven predictive tools, is expected to sustain or enhance operating margins, directly impacting future cash flow and profitability positively.

Sastasundar Ventures Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Sastasundar Ventures's revenue will grow by 30.2% annually over the next 3 years.
• Analysts are not forecasting that Sastasundar Ventures will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Sastasundar Ventures's profit margin will increase from -7.8% to the average IN Healthcare industry of 12.5% in 3 years.
• If Sastasundar Ventures's profit margin were to converge on the industry average, you could expect earnings to reach ₹3.3 billion (and earnings per share of ₹105.39) by about May 2028, up from ₹-921.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.2x on those 2028 earnings, up from -8.7x today. This future PE is lower than the current PE for the IN Healthcare industry at 39.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.53%, as per the Simply Wall St company report.

Sastasundar Ventures Future Earnings Per Share Growth

Risks

• The company's reliance on creating a profitable and efficient digital distribution model poses a risk if they are unable to maintain innovation coupled with profitability and growth, impacting future revenue sustainability and profit margins.
  
• Despite showing growth, the company's current EBITDA is minimal at 1%, indicating potential challenges in operational efficiency and cost management that could impact net margins if not improved.
  
• The company's expansion strategy into new verticals like Genu Path Labs and the digital diagnostic platform is still experimental and may not yield significant revenue or profitability in the near term, affecting earnings stability.
  
• The ability to sustain rapid growth rates in revenue and maintain improved inventory days relies heavily on achieving further gains in operational efficiencies and negotiating better procurement terms, which may not be guaranteed, impacting future net margins.
  
• The competitive landscape in the digital healthcare and pharmaceutical distribution markets may present challenges to maintaining pricing power and market share, which could impact future revenues and earnings growth.

Valuation

• The analysts have a consensus price target of ₹457.0 for Sastasundar Ventures based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹26.1 billion, earnings will come to ₹3.3 billion, and it would be trading on a PE ratio of 6.2x, assuming you use a discount rate of 12.5%.
• Given the current share price of ₹252.73, the analyst price target of ₹457.0 is 44.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.