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Vijaya continues to deliver on both growth and profitability, with revenue/EBITDA growing 20% YoY each, beating our estimates (3%/6% on sales/EBITDA). Despite commissioning six hubs in Q1 itself, margins have remained stable, owing to a robust ramp-up in the core region (double-digit growth in Hyderabad) as well as new units (Nizamabad hub broke even within just two quarters). We draw comfort from the management’s guidance of faster-than-expected break-even in one of the hubs in its non-core region as we expect Vijaya to deliver revenue/EBITDA CAGR of 18%/19% over FY25-28 period. Buoyed by this superlative performance, we raise our FY27/28E EBITDA estimates by 4% and maintain BUY, nudging up our Jun-26E TP to Rs1,225 (DCF-based), implying Jun-27E PER of 52x. Sustained growth momentum, robust balance sheet, and cash-flow generation provide comfort on valuations.

Robust performance; network execution remains on track

For Q1FY26, Vijaya Diagnostic reported consolidated revenue of Rs1.88bn (+20% YoY), with overall patient and sample volume growing 15% and 17% YoY, respectively. The Wellness segment accounted for 14% of the topline (+28% YoY). Contribution from the B2C segment stood stable at 93%, while the radiology mix improved to 39% (38% YoY). Gross margin expanded by 62bps YoY on the back of higher radiology mix and price hikes in selected tests. Higher-than-expected performance of the six newly opened centers restricted the EBITDAM contraction to 10bps YoY. PAT grew relatively better at 22% YoY, owing to 98% growth in other income. Net cash balance stood at Rs2.2bn, as of Jun-25. The company commissioned five new hubs in Q1FY26, of the 10 planned for FY26.

Outlook and risks

Vijaya’s Q1FY26 performance underpins its strong execution prowess in both core and non-core markets. After successfully commissioning five new hubs - all in non-core geographies in Q1, Vijaya’s aggressive network expansion plan remains intact for the remainder of FY26 (five additional hubs to be opened in 9MFY26). With this, Vijaya is on track to diversify beyond its core region and transition into a pan-India integrated operator. We remain constructive on the company’s ability to replicate its set template of delivering profitable growth, even in non-core geographies, given the management’s guidance of achieving break-even faster than the earlier guidance of four quarters at one of the hubs in Bengaluru. A strong balance sheet (net cash position of Rs2.8bn as of Mar25), sustained growth momentum, and robust cash generation (OCF-to-EBITDA at 82% in FY25) lend comfort on valuations, as we anticipate revenue/PAT CAGR of 18/25%, respectively, over FY25-28E. Key risks: Increased competition in the organized market (non-core markets), manpower shortage, and adverse regulatory ruling around pricing for healthcare services.

Call highlights

• Management retained its guidance of 15% revenue growth even after posting a strong performance in Q1. Volume will likely lead the growth contributing ~13% and balance from realization. 9-10% of the growth is expected to be contributed by existing centers.
• Vijaya has planned to open 10 additional hubs in FY26, of which five have been opened in Q1 (two each in Kolkata and Bengaluru and one in Pune). It is planning to add three hubs in Q2FY26 and two in H2FY26 in West Bengal. EBITDA margin is likely to be impacted by 1-1.5% on the back of these expansions.
• Management highlighted that all its six recently operationalized hubs have performed better than expected (especially in Bengaluru and Kolkata) in Q1, which restricted the impact on EBITDA margin. It is expecting these hubs to achieve break-even within 12 months (one Bengaluru hub could break even earlier also).
• The management believes that it is gaining market share from unorganized players, particularly in Hyderabad region, as evidenced by registering better growth than its peers. It also expects to gain market share in the new markets of Pune, Kolkata, and Bengaluru in the initial years of expansion.
• Company implemented price hikes for selected tests in Q1 in select geographies. Improving radiology mix along with selective price hikes has resulted in gross margin expansion.
• Vijaya’s Nizamabad hub achieved break-even within two quarters of its operations.
• Ind AS impact of Rs180mn was recorded in Q1FY26 with half attributed in depreciation and other half for interest.
• Capex for FY26 guided at ~Rs1.5bn for new centers and maintenance capex as 2-3% of revenue.
• The company uses a reagent rental model for routine lab testing equipment, while purchasing specialized lab testing equipment outright.
• It has established a regional management structure with regional heads in Pune, Kolkata, and Bangalore reporting to headquarters in Hyderabad.
• The management indicated they are open to acquisitions when good opportunities arise that meet their criteria around valuation, asset quality, and integration.
• Cash in hand stood at Rs2.7bn and net cash after accounting for capex creditors stood at Rs2.2bn as of Jun-25.

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