Krsnaa Diagnostics has witnessed a stellar surge in its stock price by 17.35% in the past three trading sessions. This significant uptick came after the global brokerage firm JM Financial reaffirmed its positive stance on the stock and raised its target price of ₹960 per share from the previous target of ₹930 apiece. The brokerage remains confident of Krsnaa’s robust execution and believes there is significant scope to re-rate.
Krsnaa Diagnostics is India’s fastest-growing differentiated diagnostic services provider, both in radiology and pathology. The company started its journey in 2011 with two radiology centre and today it is in 15 states and 2 Union Territories with over 2,900 centres across the country.
JM Financial has listed the following key factors for its bullish outlook:
Massive Revenue Growth: The company witnessed Non-Covid revenue growth of 24% YoY and 5% QoQ, with minimal Covid-related contribution. After adjusting for the ₹200 million Rajasthan contributions in the base, the first-quarter (Q1 FY24) revenue exhibited an impressive YoY growth of over 50%.
This surge, according to the brokerage, was primarily propelled by the increased activity in RHP tenders, especially in Punjab and Himachal. EBITDA margins declined by 215 basis points YoY to 22.5%, mainly due to new centre costs.
The company added 6 labs, 1 radiology centre, and over 300 collection centres in 1Q and added more than 200 collection centres during the quarter. This, along with the large-scale tenders of Rajasthan and Assam, will keep margins in check (adj. EBITDA Margin 24%), the brokerage said.
Strong guidance boosts confidence, but execution remains key: Currently, Krsnaa aims to deploy 51 CT scans, 2 MRIs, 168 labs, and 3537 collection centres as part of various contracts won, including Rajasthan.
The company is progressively operationalizing BMC and Orissa collection centres, with plans for further scaling in the upcoming quarters. Additionally, Krsnaa is actively participating in new major tenders, with details to be disclosed in subsequent quarters, the brokerage highlighted.
The management expects revenue growth of 30–35% (excluding Rajasthan). The contribution of the Rajasthan tender expected in 4Q (vs. 3Q earlier) is ₹250 million. The management now anticipates a ₹3 billion revenue contribution in FY25 (vs. ₹1.5 billion earlier).
The company aims to achieve ₹10 billion in revenue and a 28% EBITDA margin in FY25, leveraging the addition of the Rajasthan tender, the brokerage stated.
Rajasthan Tender Developments: Krsnaa's involvement in the Rajasthan tender underwent shifts after securing the L1 bidder position and receiving the Letter of Award (LOA). However, the LOA was later revoked due to disagreements related to a performance guarantee submission. Krsnaa sought legal recourse and obtained a favourable ruling from the Rajasthan High Court.
The company has now complied with the Court's directives by submitting additional performance guarantees and expects to finalize the agreement by August-end. The expanded Rajasthan tender, covering 50 districts (previously 35), is projected to contribute ₹3 billion in FY25. The tenure of this contract is 5 years (3+2). This project has an outlay of ₹2 billion, and the company is exploring vendor financing options as well, said JM Financial.
02 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
