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Vijaya Diagnostic Centre – Expanding Beyond South

Vijaya Diagnostic is the largest integrated diagnostic chain in southern India, by revenue and also one of the fastest-growing diagnostic chains by revenue

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(A) About

Vijaya Diagnostic - logo

A leading diagnostic player in AP and Telangana and one of the few organised players to offers an integrated offerings of pathology (2/3rd revenue) and radiology (1/3rd revenue). Over the last 4 decades, Vijay has expanded to around 121 centres primarily in AP & Telangana. These 2 states account for over ~95% and, over ~80% comes from Hyderabad.

Moreover, Vijay currently has a 7%-8% market share in the state of AP & Telangana.

(B) Journey

Vijaya Diagnostic - Journey

(C) Shareholding Pattern

Vijaya Diagnostic - Shareholding Pattern
Vijaya Diagnostic - Shareholding

(D) Board Members

(E) Business Model

Vijaya Diagnostic - Business Model

Vijaya follows a ‘hub & spoke’ model of expansion, with only differences being that:

(a) its spokes are owned by the company (rather than by franchisees).

(b) Vijaya offers basic radiology services such as x-ray, ECG, Ultrasound, etc. along with acting as a collection centre for pathology tests. Vijaya’s ‘Hubs’ are typically 10 times larger than its spokes and offer advanced radiology tests like MRI, CT-Scan, etc along with acting as collection centres and processing labs for pathology.

Vijaya’s Presence in Andhra Pradesh & Telangana State

(F) Revenue Segments of Vijaya Diagnostic

  • Vijaya Diagnostic - Revenue Segment

(G) Key Operational Metrics

  • Vijaya Diagnostic - Operational metrics

(H) Peer Comparison

To know the peer comparison of the diagnostic read our blog on - Growth Outlook of Indian Diagnostic Chains.

(I) Cost Structure

Vijaya Diagnostic - Cost structure

(J) Financials

Vijaya Diagnostic - Financial Trend

Company has grown its revenue at 12.83% in past 5 years, while PAT grew at a CAGR of 19.42%. Moreover, company’s operating and Profit margins increase from 13.94% in FY18 to 18.52% in FY23.

Vijaya Diagnostic - Du Pont Analysis

Company sales to total assets improved from 1.1 to 0.5 over the past 5 years. While its assets to equity increased from 1.4 to 1.6 in the past 5 years.

(K) Management Discussion & Concall

  • Company want to establish its footprint in regions adjacent to Telangana and Andhra Pradesh.
  • Moreover, company has also forayed into East India particularly Kolkata where other diagnostic centres will be built around it.
  • Further there is a shift towards preventive and wellness testing packages, as per Crisil research estimates the market for wellness and preventive diagnostics was around 9% of the total diagnostic services industry.

New Facilities

Vijaya Diagnostic - New facility

Q4FY23 Concall Highlights

- Company is getting good customer response in its recently inauguration facility in Tirupati facility.

- During the financial year company has added nearly 28 centres, 5 hubs and a state-of-the art facility. Its Rajahmundry facility has also achieve breakeven in 9 months & Punjagutta in 6 months.

- Moreover company achieved highest-ever Non-Covid revenue growth of 22.4% YoY for Q4 & 14.7% for FY23.

- Company has crossed a milestone of processing more than 1 Cr number of tests in this financial year.

Future Outlook

- Company also plan to open 15 centres each year where only the mix between hub & spoke will change.

- Meanwhile company is looking at Kolkata as major expansion plan strategy for next 2 years.

- Moreover, in future company will add more midsized spoke around Rajahmundry facility.

- Further, the capex for FY24 will be between Rs 75-80 Cr. Meanwhile, company is also looking at Kolkata as major expansion plan strategy for next 2 years. And company will also add more midsized spokes around Rajahmundry facility.

- Company further expects to grow around 15% over next few years.

(L) Strengths & Weaknesses of Vijaya Diagnostic

Strengths

(i) Established presence in medical diagnostics industry – The company has a track record of more than four decades in the medical diagnostics industry. Mr. Surendranath Reddy, the founder of VDCL, is a doctor by profession and started the first diagnostic centre in 1981.

(ii) Architecture around technical capabilities to offers radiology the most difficult to replicate and scale part of the diagnostic industry- The key differentiator for Vijaya is the high quality, experienced and also specialised radiologists it has on its payroll. A key difference between pathology and radiology is that pathology lab runs like a factory where quality of machines defines the quality of reports as human intervention is minimum. On the other hand, diagnosis of a radiology scan is highly human driven and hence having expert radiologists on payroll helps to build reputation within doctor community and attract more patients, especially in case of complex radiology tests.

Weaknesses

(i) Low entry barrier- Owing to high returns, the sector has proved to lucrative. Consequently a large number of players have entered the market and subsequently resulted in high competition with limited offerings.

(ii) Pricing Pressure- High competition in the sectors have put mounting pressure to the players to gain market share by efficiently pricing.

(iii) Technological advancement- Medical devices and tests are always getting updated due to which it is essential for the players to keep up with the global standards.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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