This Smallcap Stock is Up 40% in a Month. Will the Rally Sustain?

We are living in a world where diseases and infections are a constant concern. Hence, businesses which are involved in healthcare and diagnostics are seen as a reliable investment avenue.

If you remember, traditionally for every medicine or diagnostic test, we had to visit the chemist or a lab. Most of the things were offline.

But the tables have turned quickly in the past decade. Today, companies are venturing into digital pharmacies and are delivering medicines directly to people's homes.

Even diagnostic players have adapted to this trend and are providing customers with the convenience of conducting tests in the comfort of their homes.

Today, we are going to discuss one such company that is aggressively involved in this space - Sastasundar Ventures.

In the past five trading sessions, the stock price of the company has surged over 22%. In a month, the stock is up 43%.

But, what is the reason behind this rally?

Let's find out.

Robust Q2 Results

Sastasundar Ventures is a key player in the digital healthcare landscape. The share price of the company has rallied after the company reported its second-quarter results earlier this month.

If we look at the numbers, the company reported an impressive 40% increase in revenue to Rs 3.5 billion (bn) for the quarter under review as compared to Rs 2.5 bn a year ago.

The gross profit margins also rose by 250 basis points to 9.9% from the 7.4% recorded a year ago.

Moreover, their earnings before interest, taxes, depreciation, and amortisation (EBITDA) improved from a negative Rs 100 million (m) to a positive Rs 13 m.

This positive momentum can also be seen in the half-yearly performance. The company's revenues have surged by 54% to Rs 6.9 bn in the first half of the financial year 2024, compared to Rs 4.5 bn in the first half of 2023.

During the same period, the gross margins and EBITDA have improved by 324 basis points and 556 basis points YoY, respectively.

These positive numbers could be the driving force behind the recent rally in the company's stock.

What's Next?

Now, if we take a close look at the company, Sastasundar Ventures started with the motive to make healthcare more accessible in India.

The company had humble beginnings with SastaSundar.com which was an online pharmacy and digital health platform that was linked with over 490 pharmacies.

Two years back, the e-commerce giant, Flipkart joined the party and acquired a major stake in SastaSundar.com. That move led to the birth of Flipkart Health+.

Currently, Sastasundar Ventures is managing the distribution network for pharmaceutical and wellness products to Flipkart Health+ through its pan-India warehouses.

This has helped the company minimise cost, maximise margins and has made it a leading name in the ePharma world.

What sets the company apart is its direct ties with over 250 pharma companies.

Apart from managing Flipkart Health+, the company has two more businesses. First, Retail Kanti which distributes health products to retailers and Ghenu Path Labs which is engaged in the diagnostic services sector.

Moreover, Sastasundar Ventures is slowly climbing up the ladder and today it is the top pharma distributor in West Bengal. The company maintains a strong pharma procurement margin of over 29%.

In summary, in the second quarter earnings report, the company has highlighted that the ePharma sector in which it operates, is poised for substantial growth.

The e-pharma sector is expected to experience a compounded annual growth rate (CAGR) of 22% and the diagnostic sector is expected to experience a growth rate of 14% CAGR.

The strong digital presence of the company gives it an edge against its competitors.

How Shares of Sastasundar Ventures have Performed Recently

Over the past one month, Sastasundar Ventures share price has surged by 43%. In 2023 so far, the shares have rallied over 62.8%.

The company touched its 52-week high of Rs 506 on 22 November 2023 and its 52-week low of Rs 190 on 24 March 2023.

Domestic Institutional Investors (DIIs) have increased their stake in Sastasundar Ventures.

As of the September quarter in 2023, DII now accounts for 0.17% of the company's stake, an increase from the 0.09% stake they held during the same period last year.

About the Company

Sastasundar Ventures is a well-known name in digital healthcare. Their business mainly focuses on digital services and healthcare solutions.

While the company also operates a portfolio management service arm, it contributes only 1% to the overall revenue. Most of their revenues, 99%, comes from the healthcare segment through their network services.

For more details about the company, you can have a look at the Sastasundar Ventures fact sheet and quarterly results on our website.

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