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Dr. Lal PathLabs Stock Fundamental Analysis - Financial Results & Equity Research | Investyadnya Stock-o-Meter

Dr. Lal Pathlabs





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Shareholders more than 1%

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Brands Of Dr. Lal Pathlabs

Brands Of Dr. Lal Pathlabs




+ Largest diagnostics chain in the country with PAN India presence and consistent track record of quality and growth. One of the first private laboratories in India to get an approval for COVID-19 testing

+ Follows a hub and spoke model 
+ Added 15 labs and close to 600 collection center and 2200 PUPs in FY’21

+ Company offers an exhaustive range of pathology, radiology, cardiology tests 

+ Plans to widen footprint are on track and a new regional reference labs is already in process of being establish in Bengaluru. Another lab in Mumbai to be commissioned soon

+ A new patient app was launched during the previous quarter and being developed upon to constantly make it better

+ The company earned Rs. 220 Cr (37% of total revenue) during the quarter through Covid and allied tests
+ 90% of the business of the company operates via a franchisee-based model which means low capital cost of setting up business 
+ While south and west is a key focus area, there are markets in North and East where there is still scope for expansion. So, efforts of identifying micro clusters and establishing presence will continue unabated.
+ Building own e-commerce channel to be able to offer services digitally
- majorly operates in the Northern part of the country with very little presence in Western and Southern markets 
- price ceiling imposed by central or state government on certain set of tests can put pressure on the operating margins and revenue of the company

- Non covid testing revenue, which is a sustainable segment of the revenue has remained flat since past few quarters. This is due to the pandemic when elective procedures are not being done by people


+ healthcare markets in India are expected to become a $372 billion by 2022 on account of better awareness among people in terms of health, higher income levels, greater access to insurance products and higher investments by both public and private players, rapid advancement in terms of technology 
+ COVID-19 has taught us the importance of building a strong healthcare infrastructure across the globe and also that the development of diagnostic industry which can actually detect, prevent and manage these viruses in a better way 
+ government proposing an outlay of 2.23 lakh crores in the recent budget towards the healthcare sector, we can expect a rapid growth in this industry 
+ diagnostic industry in India is fragmented with unorganized players having a majority market stake. However, organized players are increasing their market share especially after macro-economic changes like implementation of GST, rapid spike in urban population, customers trusting a branded and reliable healthcare service provider at affordable cost followed by lockdown this year 
+ lower penetration of healthcare services in India improves the scope for growth of the diagnostic industry 
+ unorganized players account for 48% of the market share, while the organized players account for merely 15% with hospital based diagnostic centers occupying the remaining share as per FY20 reports of Dr. Lal PathLabs Ltd 
+ research reports on healthcare industries suggest that the industry should grow at 11% CAGR at least in the next 5 years 
+ growth to be largely driven by increased spending on healthcare by aging population, rising income levels, central government healthcare measures, rising awareness 
+ increasing competition in this space can actually lead to stable pricing, however, growth can only be achieved in terms of volume 
- disruption in business activities of companies in the healthcare industry on account of COVID-19 
- fall in the footfall of patients for private players operating in the diagnostic space during the lockdown 
- pressure on working capital front especially taking care of the fixed cost, debt repayment obligations, liquidity issues were some of the bottleneck challenges faced by the companies during lockdown 
- low entry barriers exist in this industry on account of low capex requirement, low government regulations 
- main chunk of the revenue for companies operating in the diagnostic space flows in from the sick care market (about 90%) whereas preventive share (wellness testing) remains an underpenetrated market


+ Strong promoter group shareholding of about 55%

+Zero shares pledged by the promoter group as on Mar’21
+ FIIs have increased their stake from ~20% in Mar’20 to ~26% in Mar’21

-DIIs have decreased their stake from ~10% in Mar’20 to ~8% in Mar’21


+ Virtually a debt free company and the credit rating obtained from credit rating agency is stable 

+ Compounded sales growth for 10 years: ~21%. The growth rates are lower (14-15%) for 3-year and 5-year time horizon

+Compounded Profit growth for 10 years: ~26%. Growths are lower (17-20%) in 3-year & 5-year time horizons. 

+Consistently Rising Operating Profit Margin % (28% in FY21)
+ free cashflows have been positive over the years driven by consistently rising cash flow from operating activities
+ cash flow from investing activities have been negative implying that the company has been undertaking capex activities very seriously

+ Healthy return ratios, ROCE is ~36% and ROE is ~27%


-Low dividend yield: 0.50% 
+Stock has grown by around 110% in last 1 year and with a CAGR of around 34% in last 5 years 
-Stock is currently trading at a premium of around 70-80% (current PE: 83.76) compared to its Historical Median PE around 50x

+The Re-rating of the stock is seen since last 1 year, majorly driven by consistently increasing FII holding since last 4-5 quarters (20% in Mar-20 to 26% in Mar-21), on the back of improved Earnings growth outlook, debt-free status and Cash-rich balance sheet of the company.


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