Near-term weakness in the non-covid portfolio is expected to be offset by the spurt in covid and covid-associated test volumes with adequate testing capacity and further scaling up the testing bandwidth, say analysts at JM Financials
Diagnostic leaders such as Dr Lal PathLabs Ltd have maintained investor confidence with a strong Q4 show. The company has remained investors' favourite with a regular rise in revenues led by market share gains, inorganic initiatives.
The company's revenues grew 43% year-on-year during Q4. Its normalised Ebitda grew 101.7% and profit surged 161%. The company continues to benefit from rising number of revenues per patient. Realisations per patient grew to ₹733 in Q4FY21 compared to ₹684 in Q4FY20. The company said that there was a rise in non-covid revenues and an uptick in covid testing volumes in March.
The covid testing business continues supporting growth. However, the key non-covid revenues have been rising keeping prospects firm. Base business revenues grew 28.6% y-o-y, highlighted analysts. This kept analysts upbeat and they expect the growth momentum to sustain.
The company continues to expand its geographical penetration in northeast and central India markets. However, the Delhi-NCR region remains its forte, driving growth. The company also highlighted that its evaluating best fit inorganic opportunities in the south and west.
The company’s strong cash position is supportive of its initiatives and inorganic growth opportunities explorations in the western and southern markets, say analysts. The company’s new reference labs at Mumbai and Bengaluru are expected to come on stream within the next few months.
Dr Lal’s strong track record in the east, post the commissioning of the Kolkata reference lab offers comfort, say analysts at JM Financials Institutional Securities Ltd. Even analysts at Nomura Research factor in higher non-covid revenues owing to the acquisition of two pathology labs during 3QFY21 and the company’s plan for setting up new reference labs in Mumbai and Bengaluru.
Near-term weakness in the non-covid portfolio is expected to be offset by the spurt in covid and covid-associated test volumes with adequate testing capacity and further scaling up the testing bandwidth, say analysts at JM Financials.
“We expect Dr Lal to outperform industry growth and register revenue, EBITDA and PAT growth at CAGRs of 16.3%, 19.6% and 24.9%, respectively, over FY21-FY23," said analysts at ICICI Securities Ltd.
While analysts remain positive on the company’s growth prospects and the Street is also upbeat, valuations of the stock may limit the significant upside for now, feel some experts. The stock, which is up about 20% year-to-date, trades at 58 times FY22 earnings estimates.
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