Event
DLPL has acquired 70% equity stake in a couple of Indore labs
Key highlights
Valuations & view
The fragmented but steadily consolidating Indian diagnostics industry is estimated to post 14-16% CAGR over FY18-20E implying significant opportunities for stronger organised players like DLPL. While the macro story for the diagnostic space remains exciting, increasing competitive intensity along with pricing pressures is beginning to burden the organic profitability growth even of industry leaders. This is reflected in DLPL’s 12% CAGR EBITDA growth over FY16-19. With meaningful price hikes are still unlikely in the near term, DLPL’s future profitability growth is likely to stay muted with any change in government regulations, mainly price caps, continuing to be a potential risk. Post the recent uptick, valuations are rich and offer limited upside from current levels. Maintain Neutral with a price target of Rs1104 (35x FY21e). DLPL’s ability to further leverage ~Rs9.6bn cash on books (FY21E) through value accretive M&A activity remains a potential upside trigger.
Dr. Lal PathLabs Limited is engaged in providing diagnostic and related healthcare tests and services. The Company is engaged in the business of running laboratories for carrying out pathological investigations of various branches of Bio-chemistry, Hematology, Histopathology, Microbiology, Electrophoresis, Immuno-chemistry, Immunology, Virology, Cytology, other pathological and radiological investigations. The Company's geographical segments include India and Outside India. The Company offers a range of tests by condition, which includes allergy, diabetes, health checkups, viral infections, fever, heart diseases, hypertension, cancer, abortions, anemia, arthritis, breast cancer, diphtheria, disorder of liver, disorders of bone, drugs of abuse, infertility, lymphoma, water purity, tuberculosis, ovarian cancer, osteoporosis, multiple sclerosis, muscular disorder, pregnancy and viral infections. The Company's other offerings include diabetes care program, loyalty card and wellness card.
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