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ICICI Securities
Vijaya Diagnostic (Buy)
Target: ₹700
CMP: ₹568.5
Vijaya Diagnostic (Vijaya) is one of the largest integrated diagnostic chains in southern India and is primarily based in Andhra Pradesh and Telangana. Other factors that differentiate Vijaya from other diagnostic chains are: nearly 92 per cent of business is its B2C (provides stickiness); and it offers a comprehensive basket of diagnostic services in both pathology and radiology.
Owing to its B2C focus and higher radiology contribution, Vijaya commands the highest margin (about 44 per cent in FY21) within the industry. The company’s focus on deeper expansion in its dominant regions, along with supportive macro factors and expectation of a faster shift of market to organised players, will help it to maintain its growth momentum.
Further expansion in East, especially in Kolkata, may drive medium to long-term growth.
The stock currently trades at valuations of 61.9xFY23E and 50.5xFY24E earnings and EV/EBITDA multiple of 28.3xFY23 and 23.9xFY24. The company has dominating position in South India, B2C focus with continuous deeper network expansion in its dominating geographies, along with supportive macro factors and expectation of faster shift of market to organised players.
We initiate coverage on the stock with Buy rating and target price of ₹700/share.
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