Krsnaa Diagnostics Q2 Stellar Show: Rajasthan Mega-Project & B2C Surge Signal HUGE Growth Ahead!

Strong Q2 Performance

• Krsnaa Diagnostics posted impressive results for the second quarter of fiscal year 2026 (Q2FY26).
• Revenue saw a significant increase of 11 percent compared to the same period last year.
• Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) rose by 18 percent, achieving a strong margin of 29 percent.
• Profit After Tax (PAT) also grew robustly by 22 percent, indicating improved bottom-line performance.

Rajasthan Project Execution

• The company's large-scale project in Rajasthan is proceeding according to plan.
• Krsnaa Diagnostics expects to have 35 laboratories and over 500 collection centres completed by December.
• The remaining 152 labs and 1,100 collection centres are scheduled for completion by the end of Q4FY26.
• Revenue contribution from this project is anticipated to begin in Q4FY26, with a substantial full-year impact expected in FY27.
• This project is projected to generate an annualized revenue of Rs 300-350 crore, a significant addition to the company's top line.

Maharashtra Project Update

• Krsnaa Diagnostics is nearing the completion of its Maharashtra project.
• This project includes the setup of 73 radiology (CT/MRI) centres.
• Approximately 25 MRI sites are already in the implementation or completion phase.

Scaling the Retail Frontier (B2C)

• The company's business-to-consumer (B2C) retail segment is experiencing rapid growth.
• Q2FY26 revenue from the retail segment surged to Rs 174 million, an 11-fold increase from Rs 16 million in the prior year.
• The management projects the retail segment to contribute 8-10 percent of FY26 revenue, accelerating to 15-20 percent in FY27.
• The long-term ambition is for the retail segment to account for 40-50 percent of total revenue.
• This segment is expected to break even by the end of FY26, despite current build-up costs.

Financial Snapshot and Margin Drivers

• The margin expansion of approximately 190 basis points was driven by several factors.
• These include higher utilization of advanced radiology equipment, improved manpower planning, and faster supply-chain processes.
• Tech-enabled automation and strong traction in the retail segment also contributed to better profitability.

Working Capital Monitor

• The transition to the SNA–SPARSH central government platform temporarily stretched the receivables cycle to around 150 days in Q2FY26.
• This platform facilitates just-in-time cash management for sponsored schemes.
• The management aims to reduce the receivables cycle to approximately 100 days, which will be a key area to watch.

Future Outlook and Valuation

• Krsnaa Diagnostics anticipates a high-teen growth rate in revenue.
• Steady-state EBITDA margins are expected to remain around 29 percent.
• A gradual improvement in Return on Capital Employed (RoCE) to 15 percent is also projected.
• The stock is currently trading at approximately 9 times its estimated FY27 Enterprise Value to EBITDA (EV/EBITDA), after a recent correction, presenting an attractive risk-reward profile.

Potential Risks

• Potential risks include a slower-than-expected ramp-up of new facilities.
• Delays in the execution of ongoing projects could also impact performance.

Impact

• The successful execution of the Rajasthan project and continued growth in the B2C segment are key to Krsnaa Diagnostics' revenue diversification and profit enhancement.
• Positive financial results and a strong future outlook could lead to increased investor confidence and a potential uplift in the stock price.
• Effective management of the working capital cycle, particularly receivables, will be critical for the company's sustained financial health and operational efficiency.
• Impact Rating: 7/10

Difficult Terms Explained

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): This metric reflects a company's operational profitability before accounting for financing costs, taxes, and non-cash expenses like depreciation and amortization. It provides a clear view of the earnings generated from core business operations.
• PAT (Profit After Tax): This is the net profit that remains after all expenses, including interest and taxes, have been deducted from the company's total revenue. It represents the final profit available to shareholders.
• B2C (Business-to-Consumer): This refers to a business model where products or services are sold directly from a company to individual consumers, rather than to other businesses.
• PPP (Public-Private Partnership): A cooperative arrangement between one or more government agencies and private sector entities to deliver a project or service traditionally provided by the public sector.
• Receivables Cycle: The average number of days it takes for a company to collect payment after a sale has been made. A longer cycle indicates cash is tied up in outstanding invoices.
• RoCE (Return on Capital Employed): A profitability ratio that measures how efficiently a company is using its capital to generate profits. It is calculated by dividing Earnings Before Interest and Tax (EBIT) by the total capital employed (debt + equity).
• EV/EBITDA: Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization. This valuation multiple is used to compare companies across industries, often used to assess a company's value relative to its operational cash flow.