Vijaya Diagnostic Centre Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Muted quarter, structural story intact: Revenue growth slowed to ~10% YoY as a healthy monsoon suppressed fever-related pathology testing and an early festive season clipped late-September volumes, but radiology still grew 16%+ and new hubs broke even ahead of plan.
• New-geography hubs are outperforming: Bangalore’s Yelahanka hub broke even in two quarters versus a one-year target, and the drag from 10 new hubs was less than 0.5% of EBITDA, not the 1–1.5% guided.
• Pune cleanup is deliberate, not broken: Revenue declined 2% QoQ because management consciously shed clients with payment issues; the Kalyani Nagar hub only began full operations in June, and an uptick appeared in the last two months.
• Margins held despite cost pressure: Gross margin contracted QoQ from vendor input-cost increases and no price hike, yet H1 EBITDA margin was ~40% and FY26 guidance of ~38% is likely to be surpassed.
• What to watch next quarter: Whether the Q3 footfall uptick converts into the guided 15% CAGR, how quickly Pune’s two hubs stabilize, and any decision on a price increase to offset dollar-driven input costs.

Quarterly Performance: The Seasonality Hit

• Volume-led growth, but below trend: Test volume grew 8.3% YoY while realization added ~1.8%, leaving the quarter short of the full-year assumption of ~13% volume growth and 1.5–2% realization growth.
• Pathology was the drag: Last year’s Q2 had elevated dengue and malaria-related testing; this year’s healthy monsoon meant those cases did not recur, creating a base-effect headwind specific to pathology.
• Radiology stayed strong: Radiology revenue grew 16%+ YoY despite national holidays and a dull season, with new hubs contributing heavily because their first-year revenue mix is dominated by advanced radiology (~70% of hub revenue in the first six months).
• Hyderabad slowed to low single digits: The core market felt the same pathology seasonality, plus an August and late-September slowdown from the early festive season; radiology still grew >16% at the company level.
• Management does not assume a shifted season: When asked if the weak pathology quarter implies a stronger Q3, management deflected, saying they expect a normalized Q3 and are confident in the 15% yearly growth target.

New Geography Expansion: Faster Break-Evens, More Hubs

• Bangalore broke even early: Yelahanka hub reached break-even in two quarters, well ahead of the projected one year; HSR Layout is on track to do the same. Management attributes this to the team spending three months training in Hyderabad before launch.
• More Bangalore hubs coming: Because of the faster break-even, the company will open more hubs than previously indicated: four to five total, with Bannerghatta finalized as the flagship centre featuring PET-CT and cardiac MR.
• Pune is a cleanup story, not a demand problem: Revenue declined 2% in Q2 (improving from 5% in Q1 and ~7–8% in Q4) because management consciously let go of clients with payment issues. The acquired asset includes many collection centres that contribute only 5% of Pune revenue, so per-centre revenue looks lower but the hub-and-spoke network is in line with core geographies.
• Pune hub addition paused deliberately: Management will wait for both existing Pune centres to settle before adding more hubs; spokes may come sooner as the team evaluates locations. Actual double-digit growth from Pune is expected in two to three quarters.
• Kolkata and tier-2 hubs progressing: Kasba hub in Kolkata launched in Q2, the third West Bengal hub this year; two more West Bengal hubs are on track for Q3. Nandyal (AP) and Khammam (Telangana) hubs also opened, strengthening tier-2 presence in core markets.

Suprita Reddy: “A lot of study went into how we would go to the market and which locations we would choose, where there was no 3 Tesla, there was no cardiac CT, there was some differentiation that we took.”

Margins: Cost Pressure Absorbed, Guidance Likely Beaten

• Gross margin contracted QoQ: Input costs from vendors rose slightly due to dollar fluctuation, and the company took no price hike to offset it. A reduction in GST may provide benefit in coming quarters.
• New-centre drag was smaller than expected: Originally estimated at 1–1.5% of EBITDA from launching 10 hubs, the actual drag was less than 0.5% because centres performed better than expected; the company still delivered ~40% margin.
• FY26 margin guidance looks conservative: H1 EBITDA margin was ~40%, Q3 delivered 39.2%, and management said the ~38% full-year guidance is likely to be surpassed. H2 FY26 is guided at 39.5–40%.
• FY27 margin outlook: Around 40%, with a slight increase expected as current-year centres break even.
• Pricing strategy is volume-first: Advanced and high-end radiology has not seen a price increase for five to six years; lab tests see only 1–2% increases over years. Management prefers to remain affordable and grow on volumes, and has not confirmed any price increase despite input cost pressure.

Suprita Reddy: “If you look at advanced and high-end radiology, there has not been an increase in price for over almost five to six years. So, we will have to look at this and then probably see what the impact is and then take a call.”

Business Model & Competitive Position

• 95% B2C with a radiology skew: Patients walk into facilities, driving higher revenue per patient compared to national players who mostly do B2B sample collection. The radiology:pathology mix is ~60:40.
• Newer geographies drive volume growth: Bangalore, Kolkata, West Bengal, and Pune are where significant investments are being made and where higher volume growth is coming from, while Hyderabad continues to grow.
• Bangalore will be volume-driven initially: Launched only six months ago, there is no scope for price increases in a new market for the first 1–1.5 years.
• Hospital referrals are not a tracked metric: Management declined to provide data on repeat patients from network hospitals, stating hospitals do not refer patients; the customer decides where to go, and corporate hospital tie-ups are a separate category.
• Market share data is unavailable: Management declined to give concrete Hyderabad market share numbers for radiology vs pathology, citing reports that are two years old; they offered only a qualitative view that radiology share is likely lower than pathology share.

People: KMP Attrition and the CTO Exit

• CTO departed for AI interests: Management described the exit as unfortunate but attributed it to the individual’s interest in AI and desire to learn and grow in that field; a replacement will be brought in as soon as possible.
• Broader KMP attrition acknowledged: There has been attrition at the KMP level over the last year to year and a half; management stated Sivaramaraju Vegesna is “family” and his potential vacuum is hard to fill, but mid-level and senior mid-level teams are strong.
• Growth plan unaffected, per management: The departing KMP were in operational and IT roles, not part of the growth strategy; 15 centres per year remains achievable. Management did not directly address whether the pace can increase to 20.

Suprita Reddy: “Today I think probably he feels that AI is something that he is interested in and when intent is to learn and grow and that appetite is in their own field, then nothing much that probably I could do.”

Guidance & Commitments

Key Metrics