Nureca Ltd. - To Gain on The Back of Fast-Paced Digital India

Summary

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• Benefit from trends like rising geriatric population and chronic diseases in India 
• Strong focus on quality and innovation and a solid product profile
• Extensive online distribution network

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Nureca (NSE:NURECA) is a leading healthcare and wellness company with a product range of over 150 SKUs across different categories. It is India’s first digital healthcare and wellness company. The company’s principal business is trading in generic pharmaceutical and home healthcare ranges. It engages in diagnosis, treatment, and prevention of illness through monitoring and analysis of health data.

Nureca operates through its brands - Dr Trust, trumom, and Dr Physio. It has a well-diversified product portfolio ranging from chronic and orthopedic to nutrition and lifestyle products. It sells its products through online channel partners such as e-commerce players, distributors, and retailers. Nurcea classifies its product portfolio into five categories such as chronic device products, orthopedic products, mother and child products, nutrition supplements, and lifestyle products. Its product portfolio comprises blood pressure monitors, pulse oximeters, thermometers, nebulizers, etc. in Chronic device products; wheelchairs, walkers, lumbar and tailbone supports, etc. in Orthopedic products; bottle sterilizers, bottle warmers, car seats, etc. In mother and baby care products; fish oil, multivitamins, probiotics, biotin, apple cider, etc. in nutrition supplements; and smart scales, aroma diffusers, and fitness trackers in lifestyle products.

Nureca’s products are manufactured at USFDA and CE-approved contract manufacturers globally and at its own manufacturing facility in India. The company was incorporated in November 2016 and also has a US subsidiary Nureca Inc.

Nureca Ltd.’s Pros

i) Integrated Value Chain - As a leading provider of home healthcare and wellness products, the company has an integrated value chain with strong control across design, engineering, fabrication, assembly, and aftermarket servicing and technical support. It provides servicing and support for its new and legacy products post-manufacture and also undertakes product servicing, repair and replacement as per warranties. The company has more than 15 USFDA approved products and 102 design patents. It has holistic Dr Trust Health Monitoring Mobile Apps connecting to Bluetooth-enabled Dr. Trust devices like BP monitors, oximeter, ECG machines, fitness trackers, etc. The company has sold more than 5 million products since 2017.

ii) Solid Reputation for Trust and Quality -Nureca through its businesses Dr Trust, trumom, and Dr Physio, and caters to different niche market segments like medical devices and health monitoring solutions, moms and babies, and restorative wellbeing, non-intrusive pain management, and holistic relaxation. Given its long-standing experience of understanding the Indian healthcare market and technical expertise, Nureca is well-positioned to respond to changing market conditions and shifting consumer preferences. The company’s products are trusted for their performance, accuracy, and quality amid customers, doctors, and medical practitioners communities. Nureca’s digital brands have established online market leadership in several product categories. 

iii) Innovative Products and Solutions - Nureca has a portable ECG Machine that performs a 12-point ECG process and records heart rhythm ECG & waveform data on a smartphone via Bluetooth which can be shared instantly with anyone. The company has innovated a BP machine that can speak in the Hindi language for the convenience of the Indians. Other than the conventional Chronic Device and Orthopaedic Products, Nureca also offers a range of lifestyle products such as smart scales, aroma diffusers, and fitness trackers, and an extensive range of nutrition supplements. Nureca’s Apps enable accurate monitoring, analysis, storage, and reporting of health data and patterns over time. They are also intuitive and easy to use. 

iv) Asset Light Business Model - Nureca operates an asset-light business model with no requirement for heavy investment on physical assets such as plant and machinery, land and property. About 95% of the company’s sales are online. It sells its products online through its website (drtrust.in) and a network of online partners. Nureca has also partnered with Croma to sell its healthcare and wellness products through Croma stores. Moreover, the company generally enters into agreements with vendors who manufacture customized products. Nureca’s business model is highly scalable.

v) Rising population and ailments - With lifestyles becoming more sedentary, there is an increased demand for chronic device and orthopedic products, and nutrition supplements. A rising aging population also acts as a tailwind for Nureca’s product demand. Given, the ease of online procurement, Nureca’s products are easily available to all. Rising awareness, healthcare consumerism, and increasing disposable income in the country should support the future growth of the company. India is a major market for medical devices with a market share of ~84%. Other than medical devices, the company has a wide offering of nutrition, lifestyle, and mother and baby products that add a nice diversification to the company’s chronic and orthopedic offerings.

Challenges 

• High dependence on third parties - Nureca depends on third parties for manufacturing and has no long-term contracts with them.
• Intense Competition - Nureca constantly faces increased competition from cheaper alternatives in a price-sensitive market like India. Some of its peers include Artemis Global, Poly Medicure, GKB Opthalmics, etc. Given the attractiveness of the Indian market, many foreign players are also trying to enter. 
• Short history - The company has a short history of existence and its products are not time-tested.
• Technology roadblocks - Challenges in innovation, delays in the development of new products and technologies could act as a major roadblock for this digital company.
• Low sales in New-normal - Nureca might experience a slowdown in earnings, once things begin to normalize around the pandemic front. As people start moving out freely, there might be less reliance on online deliveries. People might prefer to go to market and verify and buy products.

Valuation

Nureca’s shares are currently trading near Rs. 1,500 mark with a market capitalization value of Rs.1,551 crore. The company’s share prices have climbed ~120% since the IPO in February 2021. It has attractive RoE and RoCE of 52% and 66%, respectively. Nureca has a promoter holding of 70%.

 

Nureca’s Shareholding Pattern 

Source - Moneycontrol

Nureca changed its status from private limited to a public limited company in July 2020. Its IPO of Rs. 100 crore in February 2021, was subscribed 40 times and the retail portion was booked 167 times on the last day. Nureca’s IPO was considered attractive on the back of reasonable valuation and potential opportunity.

Nureca reported revenue growth of ~122% CAGR from FY 2018 - 2020 while total income and assets also registered a growth of ~70% CAGR each. Its BoD recommended a final dividend of 20% or Rs. 2/- per equity share for FY 2020-21. It has robust margins and a comfortable leverage position. The company has reduced its debt over time and is virtually debt-free now. The latest quarter performance also improved YoY.

COVID-19 Impact

The COVID-19 pandemic has strengthened demand growth for Nureca’s products. As people preferred to stay home, they placed increased reliance on quality medical products and partners to deliver online. This led to higher EBITDA and PAT for Nureca in the latest quarter.

Future Opportunities

Nureca is invested in creating a comprehensive digital ecosystem powered by IOT devices, software, systems, and services. The company is well-positioned to gain from innovations and upgrades around AI which should support building connected and holistic models of healthcare. The market for medical devices is estimated to grow at a ~10%-11% CAGR according to WHO and Nureca currently has no significant head-to-head competition in this segment. 

Moreover, Nureca is also planning to expand across geographies and customer segments in the future. It plans to increase counters and sales promoters to expand its presence and distribution in the lower-tier towns. Given its expertise in digital operations, the company could easily diversify into complementary lines of businesses as well, in the future. Trends like self-monitoring to improve people’s lifestyle and avoiding hospitals should act as a significant growth driver for Nureca.

Bottom Line

Nureca’s focus to offer high-quality, durable, and innovative tools to monitor chronic diseases and improve the quality of lives should go a long way in a country like India. As a leading B2C and digital-first healthcare and wellness company, Nureca has a bright future in the nation given the rising population and faster digital adoption rate. Given its asset-light business model, the company can focus on producing innovative and competitive products from time to time. A diversified product portfolio, growing Indian healthcare segment, and large digital presence act as strong tailwinds for the company’s future growth. 

 

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Stock Disclosures:

The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Author Disclosures:

This Article represents the Author's own personal views. The Author did not receive any compensation and do not have any business relationship with any of the companies mentioned in the Article.