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Equipment like 3T MRI give PH good hold on quality

PH Diagnostics has installed 1.5T and 3T MRI along with 32 slice CT machines which give it a good hold over quality and a head start compared to most of the competition. Another positive is that PH uses brand new equipment and not refurbished ones which conveys assurance to medical fraternity about the quality of reports. The 3 centres we visited get combined patient footfall of ~18k in a month and account for bulk of the Rs420mn annual revenues. Given the size of hub, break even typically happens at 60- 70 patients per day

PH founder to drive business in the near term

Dr Hemant Dhoka, the first generation promoter of PH, intends to run the business at least till Vijaya is comfortable with such an arrangement. He has built the business since 2000 and is very optimistic on demand as Pune is expanding on all fronts not too different from how Hyderabad is evolving. PH is looking to set up 2-3 hubs and 10 spokes over next 1-2 years including in new areas like Baner. PH has built impressive inhouse capabilities as less than 2% of pathology tests are required to outsourced to other labs. Like Vijaya, PH has a largely B2C business and expected so as Pune does not have large corporate hospitals leading to lower B2B business.

PH acquisition gives a foot hold into non AP/Telangana market; scale up efforts under way

PH acquisition has given Vijaya a like-minded integrated player with similar margin and brand positioning in local market. With strong focus on expansion, reckon PH can do 2x-3x revenues in 4-5 years on back of Vijaya’s know how in scaling up existing locations. So far the outcome of Vijaya’s expansion outside Hyderabad has not matured (primarily Kolkata) with Pune also added to the list. We believe, based on our visit experience, over the next one year efforts would be under way to open hubs quickly in Pune to capitalize on strong brand equity. Overall, reckon Vijaya is set for mid-teens growth combined with narrow margin range in next 12-15 months which may not be enough for optimism at current valuation of ~38x FY26 PE. Lower stance to Reduce as valuations have tad shifted away from our comfort zone.

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