Dr. Lal PathLabs Ltd - Robust growth with solid business model - Geojit

Dr. Lal PathLabs Limited (DLPL) offers diagnostic and related healthcare tests and services in India and internationally. Company had 200 clinical laboratories and 2,569 patient service centers (PSC) and 6,426 pick-up points (PUP) as of March 2019.

- DLPL is one of the leading players in pathology diagnostic market in India, supported by its well positioned "hub and spoke" business model.

- North India business contributed ~71% of revenue in FY19. However, company plans to increase its presence in Uttar Pradesh, Bihar, Orissa, Madhya Pradesh, Chhattisgarh, West Bengal, Bengaluru and Pune.

- Revenue grew at a 16.2% CAGR (FY15-19), helped by strategic business model and wide network. Factoring in Corona impact for 4QFY20 and early FY21, we estimate revenue to grow at a 14.0% CAGR FY20-22E.

- EBITDA margin remained in the range of 24%-26% over FY15-19. Given the fixed costs of 48-50%, we expect EBITDA margin to remain under pressure for FY21E (24.5%) and expand in FY22E (25.8%).

- Company has solid Balance Sheet, with no debt and cash & cash equivalent of Rs. 775cr as on 31st December 2019.

- We initiate the coverage with a BUY rating on the stock and a target price of Rs. 1,762 based on 46x FY22E adj. EPS.

Source : Equity Bulls

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