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N/W expansion to drive vol growth

Result Synopsis

Result Synopsis Vijaya reported a headline 2% rise in sales within which non Covid revenues increased ~10% YoY. Volume growth was weak in Oct, Nov but peaked up pace in December. While footfalls declined as last year would have included Covid testing, realization improved YoY. Margin at 39% were largely in the range of past few quarters. Vijaya management is likely to overshoot its capacity building target for FY23 with more than 15 centres including 3-4 hubs and balance spokes being commissioned in current year. Volume benefit would accrue in FY24 and we expect mid-teens growth next year on a weakened base. Realization is unlikely to increase any further though there could be variations depending on the mix in the near term. With 3 large hubs being opened in last 6 months, expect increased footfalls to drive better volume growth than current year. Given the Q3 performance, we cut FY23/24 estimates by 9%/22% as we lower revenue and margin estimates; also, introduce FY25 estimate and roll over with broadly unchanged multiple ~40x (at some premium to Metropolis given the better business model) with revised TP Rs480 (earlier Rs500).

Result Highlights

Revenues rise 2% YoY vs expectation of 8% YoY while weak seasonal trend led to an expected revenue decline QoQ; Non Covid sales up 9.8% YoY

Volume trends that were soft in Oct, Nov saw significant improvement in Dec per management

Margin at 39% down 123bps YoY as operating costs of new hubs commissioned in last 12 months lead to higher other expenses +25% YoY Depreciation up YoY on new hubs being added leading to pressure on PAT (-35% YoY)

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