Vijaya Diagnostic Centre Ltd Q1 FY2024 Concall Summary

Key Takeaways

• Steady 19% non-COVID revenue growth, entirely volume-led: Non-COVID revenue rose 19.2% YoY on 20% test volume growth, with no reliance on price increases beyond a 1% adjustment on select tests.
• New hubs are ramping faster than legacy centres: Centres opened in the last 1–1.5 years contributed ~7–8 percentage points of the 19% growth, and Tirupati hub hit operational breakeven within 3 months.
• Kolkata entry is a 5-year bet, not a near-term earnings driver: The first hub opened in July 2023, with management targeting EBITDA breakeven within 12 months and aiming to make Kolkata a home market over 4–5 years.
• Competitive noise remains just noise: No new competitor of significance has emerged, unorganized players have not increased, and neither online aggregators nor pharmacy-led radiology models have dented the business.
• What to watch next quarter: Whether the Kolkata hub’s initial patient response converts into a credible ramp-up trajectory, and whether the 14–15% growth guidance holds as older hubs enter the base.

Volume-Led Growth Engine

• Test volumes drove the quarter: Non-COVID revenue growth of 19.2% YoY was entirely explained by a 20% increase in test volumes, from 2.18 crore to 2.62 crore tests.
• Footfall growth in double digits: Excluding the COVID effect from the base, footfall growth remained in double digits, though management did not provide specific patient volume numbers when asked.
• Both pathology and radiology contributed: The integrated B2C model showed strength across segments, with radiology’s revenue mix inching up to 37% from 36% in Q1 FY23.
• Wellness segment expanded meaningfully: Wellness grew to 12.4% of revenue from 9.6% a year ago, driven by post-COVID increases in regular health checks and a shift in clientele age and education profile.

Suprita Reddy: "Dr. Reddy's always believed that prevention is better than cure, and we've been having this from the early 80s."

Hub Ramp-Up & New Centre Economics

• New hubs are the growth differentiator: Of the 19% non-COVID revenue growth, ~7–8 percentage points came from centres opened in the last 1–1.5 years, while ~11–12 percentage points came from older centres.
• Tirupati broke even in 3 months: The Tirupati hub achieved operational breakeven within 3 months of full-fledged operations, though management cautioned this was not an apple-to-apple comparison with Punjagutta because Tirupati carries only a gamma camera, not a high-end PET-CT.
• Punjagutta and Rajahmundry sustained momentum: Both hubs, which were not present in the base quarter, continued to improve business performance and contributed to the quarter’s growth.
• Hub launch cadence on track: Management reiterated its plan of 4 hubs per year, with Gulbarga and Mahabubnagar set to launch in the next 2–3 months and 15 spoke additions planned by year-end.
• Digital efficiency gains underway: New software now allows a single bill for a patient visiting multiple centres for different services, improving operational efficiency.

Kolkata: The Second Home Market Bet

• First hub launched in July 2023: The Kolkata hub is a fully automated laboratory with a 3 Tesla MRI and 128-slice cardiac CT, positioned as the first to introduce such high-end services in North Kolkata.
• EBITDA breakeven targeted within 12 months: Management acknowledged that being outside the home market may add a quarter or two to the breakeven timeline compared to hubs in Andhra Pradesh and Telangana.
• Long-term ambition is market leadership: The vision is to make Kolkata as large as the home markets of AP and Telangana over the years to come, with a dense network built over 4–5 years and a stated aspiration to be #1 after 5–6 years.
• Early patient response exceeded expectations: Management noted the initial reception was “extremely good, in fact, then what I would have expected for first Vijaya centre in West Bengal,” though it declined to provide specifics on competitor dynamics or doctor feedback.
• The sequencing logic: Management plans to spend the next 3 years saturating Andhra, the rest of Telangana, and adjacent geographies, by which time West Bengal should be ready for a dense network build-out.

Suprita Reddy: "The thought process or the vision on that market, Cyndrella, is to make it as large as the home markets of AP and Telangana over the years to come."

Competitive Positioning & Pricing

• Competitive intensity unchanged: Management described the competitive scenario as “always been the noise” and stated no new competitor of significance has emerged, nor have unorganized players increased their presence.
• Online aggregators remain irrelevant: Aggregators contribute less than 1% of revenues, and management believes patients prefer the personal touch and customer experience of visiting physical centres, which sustains strong brand recall in home markets.
• Pharmacy-led radiology models have not dented the business: When asked about a pharmacy player scaling a radiology model with aggressive discounting in Hyderabad, management stated none of those competitors have dented Vijaya’s business.
• Pricing discipline holds: No price cuts were taken; price increases were limited to a few tests where input costs rose, contributing approximately 1% of revenue.

Suprita Reddy: "Competitive scenario has always been the noise. It's always been the same on ground, like I mentioned earlier, so it hasn't made much of a difference."

PAT & Accounting Note

• Reported PAT reflects a depreciation method change: Current PAT stood at ~INR 26.5 crores; adjusting for the switch from SLM to WDV depreciation, PAT would be ~INR 20.5 crores, translating to ~16–17% YoY growth.

Guidance & Commitments

Key Metrics