Covid19 Tests will become a part of company’s portfolio – Dr Lal Path Labs

Covid19 Tests will become a part of company’s portfolio – Dr Lal Path Labs

Update on the Indian Equity Market:

On Wednesday, Nifty closed 0.06% higher at 11,102. Among the sectoral indices Metal (+4.0%), Auto (+1.8%) and Media (+1.1%) closed higher. Pharma (-0.5%), Fin services (-0.2%) and PSU Banks (-0.2%) closed on a negative side. Hindalco (+9.1%), Tata Steel (+6.7%) and Eicher Motor (+4.4%) closed on a positive note. UPL (-1.5%), HDF Life (-1.5%), and Wipro (-1.0%) were among the top losers.

Excerpts from an interview of Mr. Om Manchanda, MD, Dr Lal Path Labs with ET Now on 3rd August 2020:

  • The business was impacted in the months of April and May due to lockdown restrictions. It restricted the movement of samples to various cities.
  • The movement of patients was also impacted due to lockdown. There was a steep fall in walk-in customers.
  • The company also witness a sharp fall in OPD.
  • Recovery started in late part of May as lockdown restrictions started to get lifted.
  • They witnessed a sharp recovery in June but the trends are early as there may be pent up demand coming up.
  • The company witnessed some gains as competitors were not able to serve some markets.
  • On impact of covid on diagnostic space, Mr. Manchanda said the government has built capacity in the recent past and 60% of business is coming from the government side. The company will be working in a supporting role to the governments.
  • Tests for Covid-19 will become a part of company’s portfolio, but the trend line is not yet clear.
  • Q1 was a bad quarter for the company, non covid business had shown recovery in June. Company expects that the growth will come back in later part of the year by Q3FY21E.
  • Business related to covid is a new business for the company.
  • Historically the company had grown organically. The model is urban based.
  • The company picks up a geography and tries to cater all diagnostic needs in that area.
  • Mr Manchanda said the company is neither a wellness company nor a diagnostic company but a full-service model.
  • There are close to 215 labs as of now.

Consensus Estimate: (Source: market screener website)

  • The closing price of Dr Lal Path Labs was ₹ 1,850/- as of 5-August-2020.  It traded at 71x/50x/44X the consensus earnings per share estimate of ₹ 25.9/37/42 for FY21E/FY22E/FY23E respectively.
  • The consensus average target price for Dr Lal Path Labs is ₹ 1,769/- which implies a PE multiple of 42x on FY23E EPS of ₹ 42/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”


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