InvestorQ : What is the reason for profit growth in Metropolis Healthcare during the Sep-20 quarter? Was it due to greater demand for testing and diagnostic services?
Anamika Sodhani made post

What is the reason for profit growth in Metropolis Healthcare during the Sep-20 quarter? Was it due to greater demand for testing and diagnostic services?

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Juvina Maggie answered.
6 months ago
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Metropolis Healthcare showed a net profit growth at a very healthy clip of 40.3% to Rs.61 crore on the back of top line and better cost traction. Metropolis Healthcare is a very fast growing pathology and testing lab with multiple outlets available across India.

For the Sep-20 quarter, Metropolis Labs reported 29.14% growth in top line revenues at Rs. 288 crore. While the June numbers took a veritable hit on account of the lockdown and stringent social distancing norms prescribed by the government of India, it appears to have largely improved to above the pre-COVID levels.

Let us look at profitability now. For the Sep-20 quarter, operating profits were higher by 49.7% at Rs.80 crore. As a result, Metropolis Healthcare saw its operating margins grow from just about 23.89% in Sep-19 quarter to an extremely healthy 27.69% in the Sep-20 quarter.

Net profits for the quarter were up by 40.3% on a yoy basis at Rs.60.5 crore despite doubling of the tax liability showing the robustness of business growth in the quarter. PAT margins in the Sep-20 quarter stood higher by 167 bps at 20.99% compared to the Sep-19.

Numbers are surely impressive but there is a small risk factor to keep an eye on. You would notice from the quarterly numbers that in the fiscal year ended March 2020, Metropolis Healthcare took an extraordinary write-off to the tune of Rs24.6 crore.

This was largely on account of impairment of receivables impairment and dues that had turned not recoverable. Let me put things in perspective. The amount written off in the year ending Mar-20 is about 10% of the latest quarter revenues, which is fairly significant from a business and financial risk point of view.

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