Molbio Diagnostics targets recurring Truenat test-kit growth and margin expansion

Investment View and Truenat Platform

Motilal Oswal Financial Services initiated coverage on Molbio Diagnostics on October 6, 2026, with a BUY rating. The investment thesis is centred on Truenat, Molbio’s proprietary, portable and battery-operated molecular diagnostics platform.

Truenat enables point-of-care molecular testing with an approximately 60-minute turnaround time, low infrastructure requirements and small-batch testing capability. The platform is deployed across 8,000–9,000 diagnostic centres. Molbio has more than 12,500 Truenat devices across 90-plus countries and offers 43 assays covering 30 diseases.

Truenat Growth Outlook

Motilal Oswal expects Truenat to transition further from device-led sales to a recurring consumables model. Truenat contributed about 90 per cent of FY26 revenue, with test kits accounting for 72 per cent and devices for 14 per cent of consolidated revenue.

Truenat device and test-kit sales grew at 18 per cent and 84 per cent CAGR, respectively, during FY23–26. Test-kit volumes rose to 6.2 million units in Q1 FY27. The quarter also benefited from Rs 570 million of export orders deferred from Q4 FY26 because of Gulf-related disruptions.

The broker expects Truenat revenue to grow at about 16 per cent CAGR over FY26–29E. Key growth drivers include a broader assay menu, higher device utilisation, new indications such as HPV, expanding installations and greater international penetration.

Financial Performance and Forecasts

Molbio reported consolidated FY26 revenue of Rs 14.5 billion, up 41.7 per cent year on year, following a 31 per cent revenue CAGR during FY24–26. Test-kit revenue was Rs 10.3 billion in FY26, up 41.6 per cent year on year, while device revenue was broadly flat at Rs 2.0 billion.

Tuberculosis remained the core franchise, accounting for 74 per cent of consumables revenue and 96 per cent of test-kit volume in FY26. This highlights both the strength of the platform and its dependence on TB testing.

The broker estimates that revenue will rise at a 23 per cent CAGR to Rs 26.8 billion by FY29E, driven by greater test-kit consumption, market-share gains and international expansion.

Profitability and Cash Conversion

Profitability weakened in FY26 as EBITDA margin declined 600 basis points to 22.2 per cent. The reduction reflected higher employee and other expenses associated with headcount additions, R&D, overseas market development and sales costs.

Q1 FY27 EBITDA margin recovered to about 24.6 per cent from a loss in Q1 FY26. Motilal Oswal expects operating leverage and a more favourable consumables mix to lift EBITDA margin to 31.3 per cent by FY29E.

The broker forecasts EBITDA and adjusted PAT CAGRs of 38 per cent and 50 per cent, respectively, over FY26–29E. Adjusted PAT is expected to reach Rs 5.7 billion, with PAT margin improving to 21.1 per cent.

Cash conversion is also expected to improve. However, FY24–26 operating cash flow was volatile because of working-capital intensity, receivables and inventory.

Expansion Beyond Truenat

Molbio is expanding into imaging through Prognosys and digital pathology through OptraSCAN. OptraSCAN received USFDA 510(k) clearance in July 2026 for its integrated system, including the OS-Ultra whole-slide scanner, ImagePath software and specified HER2 image-analysis workflow.

The broker expects OptraSCAN revenue to reach about Rs 2.9 billion by FY29E. It notes, however, that the business was at an early commercialisation stage and made a minimal contribution to FY26 consolidated revenue.

Valuation and Recommendation

Motilal Oswal values Molbio at 45 times 12-month forward earnings, representing a 20 per cent premium to the sector multiple of 36 times. The premium reflects the company’s differentiated R&D-led business model and earnings potential.

This valuation produces a target price of Rs 1,800 and supports the broker’s BUY rating.

Key Risks

• Dependence on government procurement and tender cycles.
• Customer concentration and high exposure to TB testing.
• Working-capital requirements, including receivables and inventory intensity.
• Slower-than-expected Truenat adoption.
• Regulatory delays.
• Reduced global TB funding.
• Patent challenges.
• Competition from global diagnostics companies and emerging point-of-care technologies.