Quipt Home Medical Corp (TSXV: QIPT) is a US based healthcare company which provides in-home monitoring equipment, supplies, and services to patients. The corporation offers services like Daily & Ambulatory Aides, Power Mobility, INR Self-Testing, Respiratory Equipment Rental, Home ventilation, Oxygen Therapy, and Sleep Apnea & PAP Treatment.

Key Updates:

• Acquisition Update: During the first quarter of Q1FY22, the company reported three meaningful acquisitions, which are stated below:
  • Acquired a health care business in Mississippi, which is expected to add more than 4,000 active patients along with 10,000 unique orders and 590 unique referring physicians.
  • The group also took 100% stake in another health care business with its operations located in Central Illinois, which has an active respiratory patient of more than 3,700.
  • Last but not least, the corporation acquired a privately held biomedical services company which has its operations in the Southeastern United States. This would mark the company’s presence in a new segment of biomedical repair services required for respiratory equipment.

We expect, the company would be able to add meaningful long-prospects from the above three acquisitions, which would further boost the company’s overall performances in the coming years.

• Improved liquidity: At the end of Q1FY22, the company reported its quick ratio and current ratio of 1.38x and 1.70x, respectively, as compared to the industry median of 1.21x and 1.52x, respectively. This indicates that the company has enough current assets to fund its current liabilities.
• Improved Financial Metrics: For the first quarter of FY22, the company reported a higher operating cash flow of USD 5.3 million, as compared to USD 3.0 million in pcp. This is a key positive and is expected to boost the overall liquidity position. Moreover, the company reported a higher adjusted EBITDA of USD 6.0 million in Q1FY22, as compared to USD 5.1 million in pcp.
  

Risk Associated with the business:

Despite a higher topline in Q1FY22, the company failed to retain the momentum, which resulted in a net loss. This was primarily due to a rise in the input costs, and the continuation of the above trend would impact the company’s performance. Moreover, being unable to get the desired results from the acquisitions might dampen the company’s return ratios.

Q1FY22 Financial Highlights:

Q1FY22 Income Statement Highlights (Source: Company Report)

• QIPT announced its first-quarter result, wherein the company posted total revenue was recorded at USD 29.5 million, surged from USD 22.7 million in pcp.
• Cost of inventory sold, operating expenses and stock- based compensation stood higher in Q1FY22, which resulted to an operating loss of USD 1.1 million, as compared to an operating profit of USD 1.4 million in pcp.
• The company reported a net loss of USD 2.1 million, as compared to a net profit of USD 1.3 million in pcp. This was primarily due to an operating loss coupled with higher interest expenses on loans and an increase in interest on leases.

  Valuation Methodology (Illustrative): EV to Sales Based

Analysis By Kaline Group

Stock Recommendation:

For FY22, the company expects its top-line in between USD 180 million to USD 190  million, while its Adjusted EBITDA is expected in between USD 38 million to 43 million. We have valued the stock using the EV to Sales based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like HLS Therapeutics Inc, Knight Therapeutics Inc etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock on the closing price of CAD 6.13 on February 22, 2022.

One-Year Technical Price Chart (as on February 22, 2022). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV. 

 Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest. 

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices 

Note 1: The reference data in this report has been partly sourced from REFINITIV. 

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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