Buy Vijaya Diagnostic ltd For Target Rs. 1,400 By Emkay Global Financial Services Ltd
Vijaya’s Q4FY26 results surpassed our/street estimates. Revenue/EBITDA grew 27%/39% YoY, respectively, supported by volume growth (+18% YoY) and operating leverage. Vijaya’s dense network, clinician talent, high-end equipment, and strong brand equity have led to continued market-share gains in Hyderabad, reinforcing its leadership position in its mature/core cluster. With new clusters now stabilized (Pune reported 16% YoY growth in Q4) and network expansion continuing in FY27, we expect Vijaya’s growth momentum to accelerate, and estimate 19% revenue CAGR over FY26-28. Faster-thanguided breakeven in non-core regions (Khammam and Nandyal hubs saw breakeven within 2 quarters) underpins Vijaya's execution prowess and allays concerns around the scalability of an integrated operator. We anticipate ~150bps EBITDA margin expansion by FY28E on the back of the company’s strategy of accelerating spoke additions and higher share from wellness testing. Factoring in the Q4 beat, we raise FY27E/FY28E EBITDA by 4%/3% and Mar27E TP by ~8% to Rs1,400 from Rs1,300 (DCF methodology). We retain BUY. Elevated growth trajectory, strong net-cash balance sheet, and superior cashflow generation provide comfort on valuations. CMP implies FY28E PER of 47x – a 15% premium to that of DLPL.
Strong end to the year
For Q4FY26, consolidated revenue grew 27% YoY to Rs2.2bn (+5%/6% vs street/our estimate), with overall patient/sample volumes growing 15%/18% YoY. The Wellness segment accounted for 15.6% of the topline (+32% YoY). Revenue growth was broadbased across clusters, with new units in non-core geographies (RoAPT) achieving breakeven within two quarters of commissioning. Gross margin expanded by 143bps YoY while EBITDA margin, largely backed by operational leverage, expanded by 379bps to 43.5%. Adj PAT grew 34% YoY to Rs479mn. Net cash balance stands at Rs2.8bn as of Mar-26. The company has declared a dividend of Rs2/share. OCF/EBITDA conversion continues to be robust, at 80% in FY26.
Outlook and risks
Vijaya’s growth engine continues to deliver volume-led growth across clusters. The accelerating revenue growth momentum (+20% YoY), even in its mature geography (Hyderabad), highlights the company's strong brand equity and sustainable business moats as it continues to gain market share. We remain constructive on Vijaya’s capabilities to replicate its set template of delivering profitable growth, even in non-core geographies, on the back of achieving faster-than-anticipated breakeven in newly commissioned hubs in RoAPT market. With plans to add 10-12 spokes and 4-5 hubs in FY27, Vijaya’s network densification strategy should further accelerate the growth trajectory, in our view. A strong balance sheet (net cash: Rs2.8bn as of Mar-26) and superior cash-flow generation (OCF as a % of EBITDA at 80% in FY26) lend comfort on valuations (CMP implies FY28E PER of 47x and EV/OCF of 32x). Key risks: Increased competition in the organized market (non-core markets) and any adverse regulatory rulings on pricing for healthcare services.
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