IMO, revs can easily grow at 25%. But margins will likely remain subdued as company is aiming for rapid growth and the ROCEs and utilization rates will take time to mature amd fixed costs which don’t show immediate results stay elevated on account of constant expansion and new tenders.
Need to wait for expansion to slow down for margins to hit 30-35% and ROCE to grow to 25-30%.
Quarter was definitely muted and below average margins.
Capex spends are growing rapidly.
For all these costs that the company is incurring, the centres that are newly opened needs to slowly garner enough footfall before the rewards can be reaped. Operating leverage is atleast 2 years out imo, mgmt doesnt look like they will slow down on setting up new centres as long as they see the demand. Long term great but short term pain(how much pain and for how long is to bee seen).
Secondary thoughts, compared to normal diag companies engaging in b2c, I feel like even thought capacities present are more than enough, utilization rates may not ramp up as expected, aren’t they dependent on patients from public hospitals? So footfall might be limited as in rural areas, there maybe only a certain number of people in rural locations where technically Krsnaa’s capacities may be there to do more tests per day but it is practically impossible to increase them as it is dependent on population nearby who use the govt hospital. Whereas on b2c side, more people enter based on name(like lal path labs) and footfall in individual diag centrest increase that way. Please correct me if I’m wrong.
The number of bids and the scale of capacities show enough opportunities for company to scale up but revenues are still not hitting 150 crores atleast. Lets see how mgmt responds.
Disc – invested. largest position. Margins and roce and slower growth definitely concerning.
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