About Clinitech Laboratory Limited

Clinitech Laboratory Limited was stablished in 1990, today, Clinitech Laboratory Limited (Formerly Known As Clinitech Laboratory Private Limited). is one of the most respected diagnostic centres and pathology labs. They are a provider of diagnostic and healthcare tests and services through chain of 8 diagnostic centers in and around Thane and Navi Mumbai. They conduct more than 3 Lakh tests per year in our NABL (National Accreditation Board for Testing and Calibration Laboratories) accredited labs equipped with modern technology and high-end equipment.

They conduct more than 150 tests at their centres which are classified under various heads as under: 
• Biochemistry tests 
• Immunology tests 
• Hematology tests 
• Molecular Biology tests 
• Serology tests 
• Microbiology tests 
• Histopathology tests

INDIAN DIAGNOSTIC INDUSTRY
The market share is categorized as: unorganized (47%), hospital-based lab (37%) while the remaining (~16%) is with the organized players. Doctor referrals constitute a large part of this business. This includes commission payments to doctors in lieu of referring a diagnostic lab. Further, currently, the illness diagnosis segment is more prevalent than wellness segment in India.

Pathology testing or invitro diagnosis involves the collection of samples in the form of blood, urine, stool, etc., and analyzing them using laboratory equipment and technology to arrive at useful clinical information that assists in treatment of diseases. It includes biochemistry, immunology, hematology, urine analysis, molecular diagnosis, and microbiology. 

Imaging diagnosis or radiology involves imaging procedures such as X-rays and ultrasounds that help determine anatomical or physiological changes inside a patient’s body, thus assisting doctors in diagnosing. It includes more complex tests such as CT scans, MRIs, and highly specialized PET-CT scans. 

Wellness and preventive diagnostic services aim at identifying pre-existing diseases or the likely risk of particular diseases before the onset of symptoms. It is expected that wellness and preventive diagnostic services will assist people more accurately identify risks so that they can take corrective or precautionary measures before any chronic condition develops. Wellness and preventive tests are generally aligned to either specifically screen for a chronic disease or contain a series of tests to ascertain the overall health condition of an individual.

The diagnostic sector in India is highly fragmented with large chains, standalone centres and hospital-based laboratories. The lack of regulatory framework and minimum standard requirements led to low-entry barriers. However, limited test menu/offerings by regional standalone laboratories and partial coverage of hospital-based laboratories have resulted in higher opportunities for diagnostic chain players. 

Diagnostic chains have the advantage of years of experience, brand trust and recall, global quality standards and accreditations, brand experience, expansive test menu, patient touch-points to service patients locally, value-added offerings for patients and the ability to sustainably grow into newer markets. Pan India diagnostic players have been gaining market share continuously over the past few years on account of expanding collection centres and laboratory networks, which has helped them improve their asset utilisation. National diagnostic players would gain market share in coming years, especially post the COVID-19 pandemic, which would further lead to industry growth.

The diagnostic industry has emerged as an attractive play in India's growing healthcare sector and is one of the fastest growing service segments in the country. Diagnostic is a business of economies of scale and the most important metric is the cost of processing a sample. The existing players are still in the nascent stages of their growth cycles and have a long runway ahead. We are positive on the national diagnostic chains in India, given their advantages of many years of experience, brand trust and recall, global quality standards and accreditations, wide test menus, extensive patient touchpoints to service patients locally, value-added offerings, and ability to sustainably grow in new markets. Potential consolidation in the industry, organic and inorganic expansion, complemented by their strong balance sheets and return ratios, would provide tailwinds to their growth in the medium term. 

The large listed Indian diagnostic chains - Dr. Lal, Metropolis, Thyrocare - remain beneficiaries of what we view as attractive long-term industry growth story. Given the outbreak of COVID-19 and its impact on people mindset about healthcare and preventive measures over the next one to two years; we are giving higher valuation to these stocks. We see the potential for increased inclusion of diagnostic testing in health insurance and ample runway for higher market penetration as standards of living increase and preventive healthcare awareness rises.

Formalization of Diagnostic Industry:
The diagnostics industry is highly fragmented with large chains, standalone centers, and hospital-based laboratories. Owing to low entry barriers, the industry is fragmented and is witnessing a lot of small and medium sized players; however, very few are able to scale in a profitable manner. Regional Standalone Laboratories have a limited test menu and, hence, lack the capacity needed to expand in terms of service offerings and perceived quality of testing, which may not be as good as that of an established chain’s. Hospital-based laboratories are restricted to the hospital’s inpatients, with a limited and charges that are higher than diagnostic chains. Diagnostic chains, on the other hand, have an advantage of years of experience, brand trust and recall, global quality standards and accreditations, brand experience, expansive test menus, patient touch points to service patients locally, value added offerings for patients and the ability to sustainably grow in new markets. 

Diagnostic chains have managed rapid growth through opening more collection centers, which has improved their asset utilization. Moreover, large chains have greater bargaining power that allows them to keep their input costs (bulk purchase of reagents) lower than standalone centers. Standalone ones also tend to lose out on some business as they are unable to carry out complex tests and customers hold the perception that their quality does not match that of branded chains’. Hence, we can say diagnostic chains would continue to eat into standalone centers’ market share. Their situation is further strengthened after the COVID-19 breakout, with the shift from unorganized to organized players expected to happen at a faster rate now, as patients prefer visiting branded and recoginzed labs that give better quality and enhanced safety. Organized players are also likely to benefit from rise in home collection, given their strong brand recognition, reliability and quality services. The unorganized and smaller labs offer a chance to the bigger players to expand their reach and presence through acquisitions and franchisee operation model.

Positive Impact of COVID-19:
The current health scare of COVID-19 is set to change the mindset of Indian customers. An increasing number of customers will now evaluate and label diagnostics chains as ’COVID-19 capable’ and ‘non-COVID-19 capable’. With these tests becoming the new norm, a higher market share is expected to shift towards the labs offering COVID-related tests. The pandemic is helping the organized players build their brand value and goodwill, which will help attract patients. 

Customers are now anticipated to place quality over pricing when it comes to diagnostics. Higher quality standards, authentic reports, after sales service, and doctor engagement will be the key deciding factors in the lab selection process. Unorganized and standalone labs were facing severe cost pressures due to lockdown. The faster adoption of quality standards, partly enforced by the Government and partly forced upon by customers, indirectly, could result in the closure of operations for many unorganized standalone labs. A faster consolidation in the industry, along with changes in the regulatory framework, is also anticipated soon. Diagnostics chains with a lean balance sheet, strong consumer-connect, high brand recall, and following global quality standards will gain market share. We believe that the current disruption led by COVID-19 will help the industry leaders in absorbing the small and mid-sized labs, which are facing operational challenges.

CLINITECH LABORATORY LIMITED STRENGTHS
1. NABL Accreditation
2. Chain of Diagnostic Centers
3. Experienced Promoter and management team with strong industry expertise and successful track record
4. Strong and long-standing customer relationships

CLINITECH LABORATORY LIMITED STRATEGIES
1. Leveraging their existing products / services portfolio
2. Leveraging their Infrastructure
3. Collaboration and continuous Training
4. Inorganic Growth

CLINITECH LABORATORY LIMITED RISK FATORS & CONCERNS
1. Their business and prospects may be adversely affected if they are unable to maintain and grow their brand name and brand image.
2. Their operations are concentrated in Thane and Navi Mumbai, and any loss of business in such region could have an adverse effect on their business, results of operations and financial condition.
3. Substantial portion of their purchases has been dependent upon limited number of vendors/ suppliers.