Tag: Dr Lal Pathlabs

Dr Lal Pathlabs’ quarterly profit falls by one fourth as COVID-related revenue shrinks

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Dr Lal PathLab” isinid=”INE600L01024″ bseid=”539524″ nseid=”LALPATHLAB” sector=”Pharmaceuticals” exchange=”nse”]

Dr Lal Pathlabs on Tuesday reported a net profit of Rs 72.4 crore for the July-September period, down 24.8 percent compared with the corresponding period a year ago. The share of COVID-related operations shrank to 3.7 percent from 10.1 percent in the three-month period compared to the year-ago quarter.

The diagnostic company’s total revenue increased 7.1 percent on a year-on-year basis to Rs 533.8 crore, according to a regulatory filing.

Revenue from non-COVID operations increased 14.8 percent on year to Rs 514 crore, and that from COVID and the allied services slumped 61.3 percent to Rs 19.6 crore.

The company’s EBITDA margin — or the degree to which a business earns money — came down to 26.4 percent in the July-September period from 28.4 percent in the year-ago period.

Revenue in the six months to September 2022 came in at Rs 1,036.5 crore, as against Rs 1,105 crore for the year-ago period.

Dr Lal said the results for the six-month period were not strictly comparable with the year-ago period due to the resurgent COVID·19 wave in the April-June period.

Dr Lal Pathlabs shares ended higher by Rs 46 or 1.8 percent at Rs 2,625.6 apiece on BSE.

Dr Lal Pathlabs shares have rewarded investors with a return of 10.6 percent in the past one month — a period in which the Nifty50 benchmark has gained five percent of value.

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Dr Lal Pathlabs and Metropolis to see further margin erosion, says Credit Suisse

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Heightened competition from integrated horizontal players has put the Indian diagnostics sector at the cusp of a “perfect storm,” according to brokerage firm Credit Suisse.

As it initiates coverage on incumbent diagnostic players like Dr Lal Pathlabs and Metropolis Healthcare, Credit Suisse expects margin to contract by another 300-400 basis points by FY27.

Credit Suisse has an “underperform” rating on both Dr. Lal and Metropolis, but expects a downside of nearly 45 percent on Dr Lal Pathlabs from its current market price.

Although the diagnostic industry is expected to delivery a 10 percent Compounded Annual Growth Rate (CAGR), the brokerage is concerned over the companies’ margin profile as they spend more on customer acquisition, network expansion, digitalisation, and rationalisation of prices of non-specialized tests. “There is additional risk of higher payout structure to franchises, which poses further downside risk to margins,” the brokerage said in its note.

Incumbents are also looking to expand in each others’ core market. Dr. Lal, for example acquired Suburban Diagnostics in West India and is also expanding in the South, both of which are key markets for Metropolis. Dr Lal had acquired Suburban Diagnostics in an all-cash deal worth Rs 925 crore in October last year.

For Dr. Lal in particular, Credit Suisse expects the company’s Return on Capital Employed to fall to 20-25 percent over the next five years, from the current levels of 40-50 percent. It is also concerned about the company’s expansion into South India as it sees growth being gradual due to entrenched competition and low brand awareness.

Credit Suisse’s price target of Rs 1,400 on Dr. Lal implies a potential downside of 45 percent from Monday’s closing price. The stock has already corrected over 40 percent from its 52-week high. “The stock does not seem to factor in impact from competition as its current market price implies revenue growth of 14 percent and EBITDA margin of 24 percent for the next 20 years,” the note said.

A slow ramp-up of digital health platforms and a quick turnaround of the Suburban acquisition are some of the key risks to Credit Suisse’s estimates.

Credit Suisse has also initiated coverage on Metropolis Healthcare with an underperform rating and a price target of Rs 1,165, implying a potential downside of 22 percent from Monday’s closing price. The stock has already corrected 60 percent from its 52-week high of Rs 3,579.

Shares of Metropolis Healthcare are trading 0.7 percent lower as of 12:30 PM while those of Dr. Lal Pathlabs are down 1.5 percent.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Rising competition and falling COVID cases puts diagnostic sector under pressure

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Dr Lal PathLab” isinid=”INE600L01024″ bseid=”539524″ nseid=”LALPATHLAB” sector=”Pharmaceuticals” exchange=”nse”]

Dr. Lal Pathlabs is down 44 percent from its 52-week high with rising competition remaining the key talking point. Several brokerages have also sounded a word of caution with Antique saying that hyper-competition across categories will keep a check on revenue per patient and that margin is expected to correct to 24-25 percent. Nomura reflects the same, saying that the changing competitive landscape presents significant medium-term headwinds for the sector.

Speaking to CNBC-TV18, Om Manchanda, Managing Director at Dr Lal Pathlabs said that the entire diagnostic industry is facing a decline due to falling COVID cases.

“What is probably happening in FY23 is the entire industry is fighting the decline of COVID compared to last year. So a lot of sales comparison is happening because starting this financial year, COVID sales are badly down nearly about 80-90 percent. I think the first task for the industry is really to offset those losses with non-COVID,” he said.

The company, however, is concentrating on medium to long-term growth in this industry and trying to take the short-term quarterly variations due to COVID decline in their stide.

Read Here: COVID-19 in India: Over 6,000 fresh infections reported but active cases decline

According to Antique, the post-pandemic growth rate accelerated resulting in the entry of new competition but now, with things returning to normalcy, the growth per patient realisation is going to remain under pressure for the considerable future. However, Manchanda is looking at this from a different perspective.

“The comment about the rising competitive intensity and price war happening at some level, I do believe that this will definitely aid the growth of the market, especially in the area of wellness or screening. In my view, this competition really is not disrupting the cost structure it is mainly disrupting the price. So that means some of these price points may not really be sustainable,” said Manchanda.

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Also Read: Narayana Hrudayalaya to acquire Bengaluru orthopaedic hospital for Rs 200 crore

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Dr Lal Pathlabs takes 18% hit in profit on high base as COVID volumes fall

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Dr Lal PathLab” isinid=”INE600L01024″ bseid=”539524″ nseid=”LALPATHLAB” sector=”Pharmaceuticals” exchange=”nse”]

Dr Lal Pathlabs on Thursday reported a 56.4 percent year-on-year fall in net profit for the April-June period, missing Street estimates, due to a high base as a fall in COVID and allied tests ate into its profitability.

The New Delhi-based diagnostics company’s revenue for the April-June period came in at Rs 502.7 crore, down 17.1 percent compared with the corresponding period a year ago though almost in line with analysts’ expectations.

Dr Lal shares slid into the red after the earnings announcement, falling by as much as Rs 116 or 5.3 percent to Rs 2,054.4 apiece on BSE.

Analysts in a CNBC-TV18 poll had estimated Dr Lal Pathlabs’ quarterly net profit at Rs 71.2 crore and revenue at Rs 505.3 crore.

The company’s EBITDA margin — a key measure of operating profitability that determines the gap between earnings before components such as interest and taxes from expenses — plummeted by 790 basis points to 23.4 percent for the three-month period.

Analysts had pegged the company’s quarterly margin at 25.5 percent.

COVID and allied tests contributed four percent to Dr Lal Pathlabs’ revenue in the three months to June 2023, in line with estimates, according to a regulatory filing.

Analysts had factored in a fall to single digits from 36 percent in the year-ago period.

Revenue from the non-COVID segment, however, saw an increase of 25 percent to Rs 482 crore.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Dr Lal Pathlabs profit likely to nearly halve as COVID test volumes come down

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Dr Lal PathLab” isinid=”INE600L01024″ bseid=”539524″ nseid=”LALPATHLAB” sector=”Pharmaceuticals” exchange=”nse”]

Dr Lal Pathlabs is all set to report its quarterly financial results on Thursday. The New Delhi-based diagnostics company is likely to report a weak earnings for the April-June period on account of a high base. Investors will closely watch out for the management’s commentary on COVID test volumes and competition.

Analysts in a CNBC-TV18 poll expect Dr Lal to report a net profit of Rs 71.2 crore, a fall of 46.7 percent compared with the corresponding period a year ago.

They estimate its revenue to drop 16.7 percent on a year-on-year basis to Rs 606.6 crore.

Dr Lal Pathlabs’ margin — a key measure of profitability indicating the gap between revenue and expenses — is expected to be under pressure compared with the year-ago period as COVID-related volumes come down.

Analysts in the poll peg Dr Lal’s margin at 25.5 percent — down 570 basis points on a year-on-year basis.

In the quarter ended June 2022, analysts expect COVID and allied tests — which had accounted for 36 percent of the company’s revenue in the year-ago period — to come down to single digits.

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Dr Lal Pathlabs, Metropolis shares dip even as analysts are positive on diagnostics space

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of diagnostic companies Dr Lal Pathlabs and Metropolis Healthcare declined on Tuesday even as analysts suggested it is a good time to bet on stocks in this space as COVID-19 cases are gradually rising.

Dr Lal Pathlabs stock dipped 2.5 percent during the day and was trading 1.3 percent lower at Rs 2,035 on BSE at 3:10 pm. Metropolis shares, meanwhile, gave more than 3.7 percent in intraday trade and were down 3.4 percent to Rs 1,447.15. 

The downward movement in the Metropolis Healthcare stock came even as the firm clarified that its promoters have no intention to exit the business amid rumours that the Shah family (CEO Ameera Shah and her family) was looking to sell its controlling stake. It, however, did not rule out a minority stake sale.

“Metropolis Healthcare Limited continuously explores various strategic options/investment opportunities. On account of which, MHL keeps receiving inbound interest from Financial Institutions and Companies part of the Healthcare eco-system for a potential minority stake purchase in MHL,” it told the exchanges.

Meanwhile, Hemang Jani, Retail Equity Strategist at Motilal Oswal Financial Services had last week told CNBC-TV18, that he views the recent correction in diagnostic companies as a good opportunity for long-term investors.

“You had COVID and even otherwise, due to lifestyle changes, there is going to be a fair bit of growth that one can really look at for the next few years. However, in the interim, because of the kind of valuations that some of these companies have got due to the IPO boom, etc., we are going through a process of adjustment of that price increase that we had seen,” he said.

Purvi Shah, DVP (Fundamental Research)-Pharma Analyst at Kotak securities, meanwhile pointed out that diagnostic valuations are not cheap despite the sharp correction, with the pricing of Dr Lal, Metropolis and SRL 2-4 times higher than that of their cheapest organised alternatives across cities be it specialised or even semi-specialised tests.

His remarks came at a time when daily COVID-19 cases in India have begun to pick up again. On Tuesday, the country logged 6,594 fresh cases taking the total tally to 4,32,36,695, according to the Union Health Ministry. The daily positivity rate was recorded at 2.05 percent, while the weekly positivity rate was recorded at 2.32 percent.

Geojit Finacial Services last week recommended accumulating Dr Lal Pathlabs stock for a target of Rs 3,058 apiece as the brokerage is positive on the company’s strong recovery in its non-COVID business, which it believes to be more sustainable. Edelweiss, had a ‘buy’ call on Metropolis Healthcare with a target price of Rs 3,400.

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The rally in diagnostic stocks may be over but you can still ride the wave

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Diagnostic stocks such as Dr Lal Pathlabs, Thyrocare and Metropolis are in focus once again after a lull that lasted months, following a near one-sided rally in the depths of the pandemic.

With a rise in daily COVID-19 infections in the country, analysts say it may be an opportune time for investors to take positions in these stocks — especially those who missed the bus in the heart of the pandemic.

Hemang Jani, Retail Equity Strategist at Motilal Oswal Financial Services, views the recent correction in diagnostic companies as a good opportunity for long-term investors.

“You had COVID and even otherwise, due to lifestyle changes, there is going to be a fair bit of growth that one can really look at for next few years. However, in the interim, because of the kind of valuations that some of these companies have got due to the IPO boom etc., we are going through a process of adjustment of that price increase that we had seen,” he told CNBC-TV18.

He suggests avoiding the pocket from a near-term perspective.

ALSO READ: Why diagnostic stocks have retreated from peaks

Does the COVID situation make diagnostic stocks attractive given the recent correction?

Complete Circle Consultants’ Managing Partner and CIO, Gurmeet Chadha, is not impressed. The diagnostic space is up for consolidation given its unorganised nature, he told CNBC-TV18.

“Buying something just because COVID tests will go up may not be a great idea. For example, Dr Lal Pathlabs has almost 1,300 odd centers and has been trying to work on a digital presence as well. You can look at integrated players like Apollo (Hospitals), which are both into hospitals and pharmacy, and trying to do digital integration,” he said.

India’s daily COVID cases hit a more than three-month high of 7,240 on Thursday — remaining above the 5,000 mark for a second straight day. Maharashtra recorded 2,701 new cases on Wednesday — the highest in nearly four months.

Diagnostic valuations are not cheap despite the sharp correction, with the pricing of Dr Lal, Metropolis and SRL 2-4 times higher than that of their cheapest organised alternatives across cities be it specialised or even semi-specialised tests, Purvi Shah, DVP (Fundamental Research)-Pharma Analyst at Kotak securities, told CNBCTV18.com.

“Incumbents are banking on lesser reliability, lower specialised test options, limited doctor connect and operational challenges in expanding geographical presence as key growth barriers for newer entrants. But there there can still be a further downside risk to our flattish long-term pricing assumptions if the new entrants stay aggressive beyond the next few quarters,” she said.

Analysts prefer companies that can cater to COVID- as well as non-COVID-related demand.

The COVID pricing has come down significantly from Rs 4,500 to Rs 400, so even a fourth wave of the pandemic is “not going to be too meaningful”, Shah said.

Here’s what they make of the top players in the country’s diagnostics space:

Dr Lal Pathlabs

Geojit recommends accumulating Dr Lal Pathlabs stock for a target of Rs 3,058 apiece, which indicates a 43.5 percent upside at the current price.

The brokerage is positive on the company strong recovery in its non-COVID business, which it believes to be more sustainable.

“Higher traction in sales volumes due to the pandemic coupled with steady growth in the home-based sample collection business and cost optimisation
measures support growth prospects. Enhanced focus on driving volumes while maintaining prices coupled with tactical penetration in West and South through modular cluster city approach is playing out well,” Geojit said in a report in February.

Metropolis

Edelweiss has a ‘buy’ call on Metropolis Healthcare with a target price of Rs 3,400 — more than double given its current price.

However, the entry of Dr Lal through Suburban Diagnostics in Mumbai will create some challenges for Metropolis, according to the brokerage.

ALSO READ: Good time to add diagnostics stocks to your portfolio?

Dalal Street also saw two players join the secondary market in 2021: Vijaya Diagnostics and Krsnaa Diagnostics.

Vijaya Diagnostics 

ICICI Securities has a ‘buy’ call on Vijaya with a target price of Rs 379, which implies a 14.7 percent upside from its current stock price.

The brokerage remains positive on Vijaya for its:

• B2C focus
• highest margin within the industry
• continuous focus on deeper expansion in dominant regions

It, however, believes that intense competition may affect its performance in the near term.

Krsnaa Diagnostics 

Khambatta Securities has a ‘buy’ call on Krsnaa with a target price of Rs 1,117, citing the company’s unique business model driven by a niche and cost competitiveness.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Wellness testing set to rise; targeting geographical expansion for growth: Dr Lal PathLabs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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COVID cases have been declining in India. The number of active cases has come down drastically from the levels seen in January when Omicron wave had hit the country.

To understand the outlook of the diagnostic laboratories as COVID no longer remains a persistent worry, CNBC-TV18 spoke to Om Manchanda, managing director, Dr Lal PathLabs.

Manchanda reiterated that there has been a decline in COVID cases. He explained that for growth, the company is focusing on two areas. First, he expects factors such as geographical expansion to bring in growth. Second, he believes that wellness testing will rise.

He said, “There are multiple areas where we are looking at, for growth. One is, of course, geographical expansion as we recently acquired a lab in Mumbai, and we are looking at expanding our footprint in the west zone and we are also expanding our organic footprint in the south of India. Second, there is a hypothesis that wellness testing will tend to go up and if things stabilize, we will tend to focus more on wellness testing.”

Manchanda explained that the company has found it difficult to grow organically in non-core markets as competitive intensity has risen and several players have entered the space. He added that the company may have to resort to inorganic growth in order to combat it.

Also Read: Dr Lal PathLabs Q3: Diagnostic biz likely to see consolidation in next few years, says Om Manchanda

Shedding light on revenue per patient, he said that it has been highly volatile in the last two years owing to the test mix being different in each quarter. He mentioned that the revenue per patient stands at around Rs 700 for non-COVID patients. He stressed that the company has always been dependent on volume growth more than pricing growth, hence expects the revenue per patient to stabilise at current levels.

He said, “It has been highly volatile in the last two years because test mix has been pretty different on a quarter-on-quarter (QoQ) basis. During wave two, we saw COVID alike tests going up where the revenue per patient was very high. Pricing of COVID also has been falling very sharply. Initially, it started with around Rs 4,500 and now it’s hovering around an average of Rs 500-600 per test. So it has all impacted the revenue per patient every quarter.”

“Our stable revenue per patient for non-COVID has been around Rs 700 for many years and as we have always said that we are dependent on volume growth and less on pricing growth. So my sense is it should stabilize at that number if there is no further COVID business,”  said Manchanda.

Watch the video for the full interview.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow