Dr Lal Path Labs Limited is engaged in diagnostic services. Dr Lal is one of the leading consumer healthcare brands in India.
Diagnostic Companies are going through a favourable atmosphere in the recent past and may witness a sharp rise in their stock price on account of the rising RT-PCR Test due to increasing cases in the second wave of Covid-19.
Approximately 5 lakh RT-PCR tests have been done in the Q4FY21, which could cross even 10 million tests specifically for Dr Lal Path Labs.
Hence, on account of these rising test numbers, Dr Lal may report a blockbuster Q4FY21 and may also put good results in Q1FY22.
The company is having a good Operating Leverage.
Market Capitalization of Dr Lal Path Labs is valued around Rs. 26,000 Cr.
Dr Lal is also having strong return ratios. Its Return on Capital Employed (ROCE) is 32% and Return on Equity is also above 20% and stands at 22.1%.
Dr. Lal Path Labs is a zero-debt company.
The company is having high earning potential if the company infuses the retained earnings in the business.
Currently, the stock is trading at a premium valuation. It is having a high PE ratio of 108 against the Industry PE of 40.9.
Looking at the current scenario, exceptional earnings growth can be expected in Q4FY21 and also in Q1FY22.
Hence, this premium PE ratio can continue further for a longer time.
Dr. Lal Path Labs is the company that is performing and growing pathology businesses in a structured manner, as in this business many local players exist in the market where Dr Lal Path has a great presence and vision as well. The company is having a great earning and growth visibility over the longer horizon. Dr Lal Path might be highly benefited by the expenditure on Health Infrastructure by the Government. Furthermore, this business segment may witness consolidation of local players in the future by structured players like Dr Lal Path Labs, etc. Due to such opportunities and high earning visibility, this stock should be on one’s radar.
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