Dr Lal PathLabs share price rises more than 6%. Brokerages maintain positive view on growth prospects.

Share Price of Dr Lal PathLabs Ltd gained more than 6% in morning trades on Friday. Dr Lal PathLabs impressed with its Q2 performance as volume growth rebounded and financial performance came better than many analyst expectations.

Dr Lal PathLabs Q2 reported net profit at ₹111 crore was up 53% year-on-year. The earnings before interest tax depreciation and amortisation (Ebitda) improved 23.6% year-on-year to ₹178 crore. The revenues at ₹601 crore grew 12.6% year-on-year.

Dr Lal PathLab Q2FY24 revenue and Ebitda beat consensus estimates by 2% and 13% respectively, said analysts at Nuvama Institutional Equities.

The same was helped by healthy non-covid revenue growth of 14.4% year-on-year led by 12% sample growth.

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Dr Lal PathLab Ebitda margin was impressive at 29.6% and an improvement of over 26.9% in year-ago quarter as well as 280 basis points higher compared to consensus estimates.

After several quarters of struggle, volume growth finally picked up pace, said analysts at Nuvama. Management expects to sustain and improve low double-digit volume growth by going deeper in core markets, they added. 

The positive for Dr Lal PathLabs and other organized industry peers is that the pricing pressures too have receded with some online diagnostic service providers raising test prices.

The expansions and increasing penetration by the Dr Lal PathLabs is also positive for volume growth and market share gains. The Revenue Tier 3+ cities have increased 18% CAGR over FY20-23 as per the company. The total revenues have grown at a rate of 15% CAGR during the period.

Dr Lal PathLabs is focusing on widening and deepening its presence in uncovered markets organically (Uttar Pradesh, Bihar, Orissa, etc.) as well as inorganically South is its top priority, as per analysts at JM Finacial.

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Dr Lal PathLabs has also launched its new direct to customer initiatives in various regions as Mumbai, Goa, and Pune region to increase its B2C footprint, and as per Antique Stock Broking estimates, this is likely to result in 12% growth in Western markets. However, they also estimate Suburban to remain margin dilutive for a few more years before the newly opened centers break even.

Nevertheless, with the reduction in competitive pressures and aggressive expansion by Dr Lal PathLabs in the western region, analysts at Antique Stock Broking have increased their FY25 revenue and Earnings per share estimate by 3% and 11% respectively.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.