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JMFL
Dr Lal PathLabs (Buy)
CMP: ₹1,701
Target: ₹1,750
Dr Lal PathLabs reported a muted performance in 3QFY20 with sub-par growth of 2 per cent in the Delhi NCR market even as growth in the Rest of India (RoI) markets remained strong (+19.8 per cent y-o-y). Revenue/EBITDA/PAT of ₹ 327.9 crore / ₹82.3 crore/ ₹54.1 crore grew by 12 per cent/25 per cent/18 per cent y-o-y and were -4 per cent/-13 per cent/-20 per cent vs our estimates. Patient volume growth (+11.3 per cent y-o-y) missed our estimates by 5 per cent primarily on account of a harsh and prolonged winter in NCR with the competitive intensity in Dr Lal’s core market continuing to accelerate. Realization per patient (₹688, +1 per cent y-o-y) was in line with our estimates.
Dr Lal continues to focus on expanding its presence in the Western & Southern markets via acquisitions with the strong balance sheet offering sufficient room for exploiting inorganic growth opportunities in new geographies. While we are more cautious now given the sharp run-up in the stock price, we will wait for a quarter to see if the slowdown in NCR is structural in nature.
We cut our FY20/21E EPS by c.5 per cent and arrive at a Mar’21 target price of ₹1,750.
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