Dr Lal Pathlabs - Q4 FY21 Result Update - YES Securities

(Rating: ADD, TP: Rs3,000, Upside: 6%)

- Q4 results show rebound in non COVID business on weak base of last year; near term uncertainty in Q1 FY22 as 2nd wave impacts patient footfalls

- At Rs15bn revenue, DLPL is amongst largest diagnostic players with a large runway for growth given the familiar tailwinds of rise in organized share and absolute size of market.

- We reckon DLPL can continue to clock healthy 15-16% revenue and PAT cagr over next few years without any significant debt or dilution in return ratios (barring temporary capex periods for regional reference labs).

- Our target PE of 60x is driven by 1) diagnostics being a scalable business with solid FCF generation capabilities evident at DLPL and 2) underlying growth is better than the domestic branded formulation business of pharma companies.

- While near term upsides appear modest, we adopt a positive view on the business and begin coverage with ADD rating. Our TP is based on 60x FY23 EPS and we remain marginally ahead of consensus on FY23 earnings.

- Key risks would be sustained drag on ROE/ROCE emanating from expansion in newer geographies which can be damaging to multiples.

Shares of Dr. Lal PathLabs Ltd was last trading in BSE at Rs.2783.15 as compared to the previous close of Rs. 2833.65. The total number of shares traded during the day was 29931 in over 4553 trades.

The stock hit an intraday high of Rs. 2809.5 and intraday low of 2740. The net turnover during the day was Rs. 82905023.

Source : Equity Bulls

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