Sell

Vijaya Diagnostic’s (Vijaya) Q2FY26 performance was weaker than our expectations due to a slowdown in core markets of Hyderabad (+3% YoY). Pathology revenue grew at a modest pace of 5.1% YoY on a high base of last year and a slowdown in footfalls due to early festive season.

Elevated Valuations Dampen Strong Fundamentals

Quarterly Update Q4FY24

Vijaya Diagnostic Centre’s (Vijaya) Q2FY24 result was a beat vs our estimates driven by 18.3% YoY growth in non-covid business. Test volume growth remained healthy at 18.7% YoY. In Q2, it commercialised a new hub in Kolkata; the company is witnessing good traction and expects the hub to breakeven in next three quarters.

unsustainable rise in volume of patients and samples (all time high) We reinitiate coverage on DLPL stock with Sell' rating, previously kept Under Review'. 1QFY22 earnings were higher than our estimates solely driven by additional volumes, due to large number of patients in the second wave. Business in core portfolio grew 15% YoY given 1) all collection centers and labs resumed operations much earlier than expected 2) high revenue...

and 3) increased employee cost at 16% of sales (v/s 11% YoY and 13% QoQ). EBIT margin for diagnostic segment was 9% v/s 42% YoY. its profitability because of 1) lower gross margin at 53% (v/s 72% YoY) due to We remain negative on entire diagnostic chain due to possible structural...

We remain negative on the entire diagnostic chain with a belief of 1) premium players losing their market share to unorganized players, 2) B2B (40% of revenue) partners negotiating to partially offset their loss of profit, 3) Inability to hike prices causing lower realization level (Revenue/Patient) and 4) higher fixed costs (60-65% of operating cost for DLPL), new compliance expense and home collection of samples will lead to lower EBITDA margin. However even after increased estimate, we maintain SELL' recommendation but revised TP to Rs1,006 (from Rs895) on PE 40x of FY22E due to challenging...

Reported lowest ever EBIT margin for diagnostic segment at 25% We reduce our earnings estimate by 56% and 42% for FY21-22E and downgrade THYROCARE to SELL (earlier HOLD) with a new TP of Rs307 (earlier Rs523) 18x PE on FY22E.We believe THYROCARE earnings to be significantly impacted due to 1) loss of core business due to COVID lockdown and low footfall till 1HFY21E 2) post lockdown to struggle for competitive market share 3) high operating expenses (to comply with COVID guidelines).Despite having a track record on asset optimization, EBITDA...

28-30% of revenue compared to last year in Q1FY21E and gradual recovery from Q2FY21E. As per the management, 60-65% of DLPL's total operating cost is fixed in nature and the new additional expense (cost of safety for...

Expansion plan to be led by mix of organic and acquisition route We met the management team of Metropolis Healthcare (METROHL) at their Global Reference(Mumbai) to understand their business outlook for next few fiscals. We believe METROHL will continue to focus on specialized test (low volume and high complexity), and increase its share in B2C business by partnering with local labs (with sizeable track record) and converting them into Metropolis-branded PSCs (Patient Service Centre). Its wide range of test menu and patient shift towards organized diagnostic player are some...