Target: ₹1,010

CMP: ₹667.85

We recently visited Krsnaa’s new state-of-the-art Kurla (Mumbai) pathology lab. This new lab caters to BMC collection centres and will be leveraged for a B2C foray.

It has the potential to test 30K-40K samples/day (scalable to 1 lakh tests/day). The lab’s current test offering is 250-300 tests, which will be expanded as it ramps up. In addition to digital ads, Krsnaa is in the process of rolling out a website and mobile app to increase private walk-ins and improve positioning.

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While PPP remains its core focus, this new experiment can incrementally contribute to growth over the medium to long term, in our view. In its recent earnings call, Krsnaa maintained its 30 per cent revenue growth guidance for FY24 (ex-Rajasthan) and believes it can grow at this rate over the next 4-5 years.

Margin may remain subdued in the near term due to large new centre implementation costs but will start normalising from Q4. The Rajasthan agreement is yet to be signed despite a favourable verdict from the Rajasthan High Court and the company has once again taken legal recourse to enforce the court order.

Given the healthy revenue momentum, new centre visibility and tender pipeline, we believe there is sufficient scope to re-rate. BUY

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