Vijaya Diagnostic Centre Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Strong quarter, 29% revenue growth: Organic growth of 20% was driven by both footfall and test volume, with B2C share at 93% and wellness contributing 13.4% of total revenues.
• Margins held at 39% despite expansion: EBITDA margin remained healthy even with annual increments and new hub hiring; management expects a full-year margin around 40%.
• Aggressive hub rollout locked in: Leases signed for nine new hubs across home states, Pune, and West Bengal, all to be operational within 12 to 18 months, funded entirely from internal accruals.
• PH Pune integration on track: Revenue of ₹11.4 crores was in line with expectations after a brief April dip from system transitions; July was a great month and no big issues are expected.
• What to watch next quarter: The pace of commissioning for the nine new hubs, the trajectory of PH Pune revenue after the system transition, and whether the Gulbarga hub achieves breakeven by September.

Financial Performance

• Revenue growth composition: 29% YoY growth split into 20% organic and the rest from the PH acquisition. Footfall grew 17% and test volume grew 20%, with both radiology and pathology segments contributing.
• Realization per patient rose 5% YoY: The increase came from two sources: the PH acquisition brought higher realization per test and footfall than Vijaya standalone, and the number of tests per patient increased across the network. Within PH, hubs have higher tests per footfall than spokes.
• Same-store growth remains robust: Centers older than two years delivered approximately 12-13% revenue growth, while the rest came from centers opened in FY23 and FY24. Management expects existing centers to continue growing for at least 1-2 more years.
• Employee cost step-up: Employee cost increased 11.5% QoQ due to annual increments, and 30-31% YoY partly due to PH consolidation and hiring for new centers. Q1 typically sees a 0.5% to 0.6% margin dip versus the full-year average.
• PH revenue per patient dip was a system artifact: A slight sequential dip in PH revenue per patient and revenue per test was caused by the IT system transition: the old system counted multiple bills for the same patient visiting multiple branches as separate footfalls. After rectification, revenue per footfall actually went up slightly.

Narasimha Raju: "So what I expect is that going forward, the EBITDA margins will continue to be in the range of 39% to 40%, okay? For the full year, what I expect is around 40% EBITDA margins we will expect."

Hub Expansion Strategy

• Nine new hubs locked in: Leases have been signed for nine hub locations: two in Pune, three in West Bengal, and four in home markets and adjacent geographies. All are scheduled to commence operations over the next 12 to 18 months.
• Majority commissioning in H2 FY25: Most of the nine hubs are likely to be commissioned in Q3 and Q4 this year, which could concentrate the upfront cost drag in those quarters.
• Hub breakeven track record is fast: All hubs to date have achieved EBITDA breakeven either superfast (Tirupati in one quarter) or within three quarters (Kolkata), and never beyond one year. New hubs in Kolkata and Pune are expected to achieve P&L EBITDA breakeven within one year.
• Gulbarga is the lagging exception: The only hub yet to break even, launched at the end of November, is expected to reach breakeven in August or September.
• Advanced radiology drives faster ramp-up: New hubs see higher revenue from advanced radiology in the first 5-6 months because radiology is done on-site, while pathology volumes build more slowly as samples can be sent to headquarters. A network of 250+ doctors and L&D investment enables high-end cases that competitors cannot handle.

Sivaramaraju: "Because of our advanced radiology advantage, initially, in the initial like first five, six months, we see higher revenue coming from advanced radiology. And then slowly, pathology takes on."

Margin Sustainability

• 39-40% margin seen as sustainable: Management is confident this range holds despite the aggressive 18-month expansion plan. If multiple hubs open in one quarter, there may be a drag in that quarter, but subsequent quarters see revenue ramp-up. At a full-year level, no significant impact is expected.
• Historical precedent supports the claim: Past years with 4-5 hub openings also showed minimal drag because ramping hubs and existing centers grow simultaneously. The expected quarterly impact is only 0.3% to 0.4%.
• PH margins stable near 41%: PH margins remained close to 41% in both Q4 and Q1, with revenue dipping only slightly from ₹11.7 crores to ₹11.4 crores due to a brief April dip from operational changes in Pune.

Narasimha Raju: "So I don't think there will be any material impact, okay, on the EBITDA margins currently that we're having, okay? So only like 0.3% to 0.4% here and there might happen, but what I am confident is that between 39% to 40% is a sustainable EBITDA margin in spite of the aggressive expansion that we are focusing in the next 18 months."

Geography & Market Development

• Hyderabad still dominates, but mix is shifting: Hyderabad currently contributes approximately 72% of revenue. Management aims to grow faster in Pune and Kolkata so that Hyderabad's share organically declines to around 65% over 3-4 years. The majority of capex is going to these newer geographies.
• Kolkata hub validated the model: The VIP Road hub completed its first year and achieved breakeven within three quarters. Kolkata volumes are now growing at double digits after adding a second center.
• Pune is capacity-constrained, not demand-constrained: Existing PH centers are seeing growth but face capacity issues, which is why new centers are being opened. No big issue is expected in Pune.
• Ongole hub opens a new Andhra cluster: The new hub in Ongole covers three districts (Prakasam, Bapatla, Palnadu), a market similar to Tirupati and Rajahmundry. It is a healthcare hub with corporate hospitals like Aster DM and KIMS and 150+ super-specialty doctors, and is equipped with a 3.0 Tesla MRI and 160-slice cardiac CT.
• Pricing varies by market: Kolkata pricing is slightly higher than Hyderabad for most tests excluding MRI; Pune pricing is almost equivalent to Hyderabad.

Sunil Chandra: "I'm also happy to share that our new hub center at VIP Road, Kolkata has completed its first year of successful operations, achieving breakeven within just three quarters."

PH Pune Integration

• Revenue in line, with a system-transition dip: PH delivered ₹11.4 crores in revenue, down slightly from ₹11.7 crores in Q4. The dip was concentrated in April when the brand changed to Vijaya PH and back-end systems were aligned to the parent company. May and June saw recovery, and July was a great month.
• Year-on-year flat, but no levers pulled yet: PH revenue was more or less flat YoY with no price increase and no capacity expansion. June saw single-digit YoY revenue growth.
• System transition caused a measurement distortion, not a demand problem: The slight sequential dip in revenue per patient and revenue per test was an artifact of the old IT system counting multiple bills for the same patient visiting multiple branches as separate footfalls. After transitioning to new systems, revenue per footfall actually went up slightly.

Sivaramaraju: "I would not say it's because of the brand change, it's more because of the system changes. Generally, whenever you do that transition, you have some hit."

Corporate Developments

• Medinova merger filed: The board approved a scheme of amalgamation for Medinova, a listed subsidiary, to merge into Vijaya Diagnostic Centre with an appointed date of April 1, 2024. The merger is to optimize compliance and operational costs and will have no material impact on consolidated financials.
• Expansion fully self-funded: The nine-hub expansion plan will be funded entirely from internal accruals, with no external financing required.

Guidance & Commitments

Key Metrics