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AnandRathi
Dr Lal PathLabs (Buy)
CMP: ₹1,670
Target: ₹1,999
Dr Lal PathLabs Ltd (DLPL) is engaged in the business of providing diagnostic and healthcare related tests. DLPL is the number one brand in diagnostics across different matrices like revenue, profitability, number of tests offered etc.
The company has very strong and continuously improving financials with its revenue, EBITDA and PAT growth at a CAGR of 16 per cent, 18 per cent, 20 per cent, respectively, over the past five years. The company has a very healthy balance sheet and has maintained very high return ratios in a industry which is effectively loss making because of the fragmented nature of the industry. The diagnostics industry remains highly fragmented and largely unorganised with standalone centres and hospital based centres contributing to 48 per cent and 37 per cent of the entire market. This gives tremendous opportunities for large chains like DLPL to grow on the basis of geography.
Given the companies impressive performance over the years, favourable industry traits, future growth opportunities and differentiated business model, we believe that the company is well positioned for long term growth and we initiate our coverage on the company with a BUY rating.
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