Rajasthan PPP And Retail Expansion Will Shape Healthcare Future

Key Takeaways

• Geographic and retail expansion, supported by public-private partnerships and digital initiatives, is expected to drive revenue growth and improve margins.
  
• Increased healthcare demand and efficient collections are enhancing cash flow quality and strengthening long-term operational performance.
  
• Heavy dependence on low-margin government contracts, slow retail growth, and rising costs pose risks to profitability, cash flows, and long-term business stability.

Catalysts

Provides diagnostic services in India.

• The recent win and upcoming rollout of a large, multi-year pathology PPP contract in Rajasthan (expected to generate ₹300–350 crore annually), significantly expands Krsnaa's geographic footprint and positions it to benefit from rising healthcare spend and government's increasing reliance on public–private models, providing strong multi-year revenue visibility and order book growth.
  
• Rapid expansion of retail (B2C) touchpoints-from 362 to over 2,400 YoY-leveraging PPP infrastructure, is driving higher-margin, cash-generating patient volumes; as the share of retail grows from 6% towards a targeted 18–20%, this mix shift should boost both revenues and net margins in coming years.
  
• The ongoing government push towards broader health coverage (Ayushman Bharat, insurance penetration) and higher chronic disease prevalence in India ensure sustained diagnostic volume growth, directly supporting Krsnaa's patient base and topline over the long term.
  
• Asset-light expansion via hub-and-spoke and franchise models, combined with digital/automation initiatives (AI, PACS, teleradiology), is expected to drive further cost advantages, higher operating leverage, and sustained EBITDA margin improvement.
  
• Receivable collections from overdue government contracts have started normalizing, and with retail growth lowering working capital intensity, there is likely to be improvement in cash flow generation and return ratios, supporting better earnings quality ahead.

Krsnaa Diagnostics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Krsnaa Diagnostics's revenue will grow by 27.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.8% today to 13.8% in 3 years time.
• Analysts expect earnings to reach ₹2.1 billion (and earnings per share of ₹53.63) by about August 2028, up from ₹802.1 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.5x on those 2028 earnings, down from 33.2x today. This future PE is lower than the current PE for the IN Healthcare industry at 43.3x.
• Analysts expect the number of shares outstanding to grow by 0.1% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.73%, as per the Simply Wall St company report.

Krsnaa Diagnostics Future Earnings Per Share Growth

Risks

• Krsnaa's significant reliance on large government public-private partnership (PPP) contracts exposes it to policy changes, tender losses, payment delays, or disruption in key states like Karnataka-introducing significant revenue and earnings volatility and challenging long-term visibility.
  
• Rapid retail expansion is still subscale, with B2C business representing just 6% of revenues and the retail venture yet to achieve EBITDA breakeven, indicating a risk that profitability could be dragged if retail scale-up is slower or less profitable than projected, impacting net margins.
  
• Volume growth lags industry peers (4% vs. industry 10% as per discussion), raising concerns about Krsnaa's ability to maintain or grow market share in a competitive landscape, which could constrain long-term revenue growth and overall earnings momentum.
  
• The company's deeply discounted pricing model (tests 70%–90% below market) to win volume and contracts could become unsustainable in the face of rising input/material costs, increased labor expenses, or tightening regulations on minimum test pricing, risking gross margin compression.
  
• Increasing working capital requirements in PPP projects (noted receivables at 120 days and historical payment delays) and variable cost structures with significant upfront Capex (e.g., ₹200–250 crore for Rajasthan, funded partly with debt) could strain free cash flows and depress return on equity if receivable cycles worsen or new wins do not ramp up as planned.

Valuation

• The analysts have a consensus price target of ₹1120.0 for Krsnaa Diagnostics based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹1320.0, and the most bearish reporting a price target of just ₹949.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹15.2 billion, earnings will come to ₹2.1 billion, and it would be trading on a PE ratio of 24.5x, assuming you use a discount rate of 12.7%.
• Given the current share price of ₹820.05, the analyst price target of ₹1120.0 is 26.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.