ICICI Securities Issues Stern Warning on Vijaya Diagnostic Stock! Target Price Slashed – What Investors MUST Know!

ICICI Securities has released a research report on Vijaya Diagnostic Centre, maintaining a 'REDUCE' rating and adjusting its target price downwards to INR 950 from INR 1,000. The downgrade stems from Vijaya Diagnostic's Q2FY26 financial performance, which fell short of expectations. This was attributed to a significant slowdown in its primary markets, notably Hyderabad, which saw only a 3% year-on-year (YoY) growth. Pathology revenue also experienced modest growth at 5.1% YoY, impacted by a high base from the previous year and a dip in customer footfalls possibly due to the early festive season. Despite these challenges, the company is strategizing for future growth, planning to introduce two new hubs in West Bengal during Q3FY26 and an additional 4-5 hubs in Bangalore by FY27. Management projects a recovery in Q3FY26 and aims for a substantial 15% revenue Compound Annual Growth Rate (CAGR) over the next few years. They also anticipate that the new hubs will have a minor 50 basis points impact on the EBITDA margin, potentially helping them exceed their previous guidance of 38-38.5% for FY26, with an expected ~40% margin in FY27. However, ICICI Securities has revised its EBITDA estimates downwards by approximately 7% for FY26 and 9% for FY27 to account for the observed revenue slowdown. The report assigns a target price based on a Discounted Cash Flow (DCF) model, valuing the stock at 50.4 times FY27 earnings per share (EPS) and 25.9 times FY27 Enterprise Value to EBITDA (EV/EBITDA). Impact: This report is likely to negatively influence investor sentiment towards Vijaya Diagnostic Centre, potentially leading to downward pressure on its stock price due to the 'REDUCE' rating and lowered target price. Definitions: Q2FY26: The second quarter of the fiscal year 2025-2026. YoY: Year-on-Year, comparing performance to the same period in the previous year. CAGR: Compound Annual Growth Rate, the average annual growth rate over a specified period, assuming profits are reinvested. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's operating performance. EPS: Earnings Per Share, the portion of a company's profit allocated to each outstanding share of common stock. EV/EBITDA: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization, a valuation multiple. DCF: Discounted Cash Flow, a valuation method used to estimate the value of an investment based on its future cash flows.