VIJAYA - Vijaya Diagnostic Centre Limited Share Price

The management of Vijaya Diagnostic Centre Limited provided a constructive outlook during the Q4 FY '25 earnings conference call, indicating confidence in future growth despite facing certain challenges. Here are key forward-looking points articulated by the management:

1. Expansion Plans: The successful launch of six new hubs in Pune, Bengaluru, and West Bengal was highlighted, with three additional hubs in West Bengal expected to become operational in 3 to 4 months. Moreover, leases for two more hubs in Tier 2 locations of Andhra Pradesh and Telangana have been finalized, with an operational date targeted for H2 FY '26.

2. Financial Performance: For Q4 FY '25, consolidated revenue increased by 12% YoY to INR 173 crores, while the full-year revenue stood at INR 681 crores, marking a 24% growth. The EBITDA for Q4 was INR 69 crores with a healthy margin of 39.8%, and for the full-year, EBITDA was INR 273 crores with a margin of 40.1%.

3. Breakeven Targets: Management set breakeven targets for the newly launched centers at one year post-opening. Specific timelines included expecting the Pune centers to break even within a year, along with similar expectations for centers in Bangalore and Kolkata.

4. Market Trends and Growth: The management anticipates an overall revenue growth of over 15% CAGR for the next few years, driven primarily by increased test volumes rather than significant price inflation. They noted the company's foothold in Tier 2 and Tier 3 markets, where pricing is likely to align with established locations.

5. Capex Investments: Capex for FY '26 is projected to be between INR 145 crores to INR 150 crores, focusing on the opening of hubs and technological investments to fortify expansion.

6. Earnings Impact: Management cautioned about potential margin compression in FY '26 due to the new hub additions, predicting a 1% to 2% drag on EBITDA until these centers stabilize.

Management remains optimistic about the company's potential for growth, driven by strategic expansions and operational improvements across various markets.

Here are the major questions asked during the Q&A session of the earnings conference call, along with detailed answers:

1. Question: "Is there any particular reason why our gross margins have contracted despite strong growth in wellness in the current quarter?"
   Answer: "The contraction is primarily due to the wellness segment, which contributed 15% of our revenue. Wellness typically operates at discounted prices. We also faced minor input cost increases. Thus, you should structure it as the new normal due to sustained wellness growth and ongoing cost pressures."

2. Question: "Have you broken even in Nizamabad and Ongole?"
   Answer: "Yes, Ongole has broken even, consistently exceeding revenue targets recently. Nizamabad is nearing breakeven and is expected to do so within the first year of operation, even with a delayed license affecting its service range."

3. Question: "What are the breakeven targets for the new hubs in Pune and Bengaluru?"
   Answer: "Both Pune hubs, Ambegaon and Kalyani Nagar, are expected to break even within a year of opening. Kalyani Nagar is set to begin operations shortly due to current training schedules. The same applies to Bengaluru and Kolkata hubs."

4. Question: "Can we expect a dip in margins in FY '26 with a possible recovery in '27?"
   Answer: "Yes, we anticipate a margin dip of about 1%-2% in the first two to three quarters as new centers stabilize. We expect recovery as these hubs start to contribute meaningfully to revenue by the end of FY '26."

5. Question: "What's the capex plan for FY '26?"
   Answer: "Our capex for FY '26 is estimated between INR 145 crores to INR 150 crores, considering both opened and upcoming centers."

6. Question: "What was the pathology revenue mix for FY '25?"
   Answer: "Pathology typically represented 62%-65% of revenue, with routine tests composing about 15%-20%. The specialty tests were 20% of revenues created from advanced radiology, with the rest from basic tests."

7. Question: "How should we view growth prospects in the near future?"
   Answer: "We're confident in achieving a 15%-16% CAGR over the next few years, driven mainly by volume growth, with 1%-2% attributed to value growth."

8. Question: "What's the expected volume growth from new hub additions?"
   Answer: "We expect an incremental volume growth of 3%-4% from new centers in FY '26 primarily driven by advanced radiology, but total volume growth may be around 2%-3% this year."

9. Question: "What will be the revenue growth expectations excluding wellness?"
   Answer: "Excluding wellness, we expect robust growth from our other core areas. The share of revenue from non-core markets is projected to be higher than 20%."

10. Question: "What's your guidance for revenue and EBITDA margins for FY '26?"
    Answer: "We expect revenue to grow by 15%+, with a slight drag on EBITDA of 1%-2% due to the simultaneous opening of multiple centers as these will take time to stabilize."

These answers encapsulate the company's financial outlook and strategic positioning based on expansion activities and market dynamics.