Dr Lal PathLabs - Q1 FY22 first cut - Beat across the board - YES Securities

- Revenues at Rs6bn, up 41% qoq and not comparable yoy due to a suppressed base; COVID contributes 36% to Q1 sales with 1.1mn RT PCR tests

- Most of the COVID revenues in Apr-May with June contributing just Rs270mn

- Non COVID business up 87% yoy; Margin up ~300bps qoq despite higher COVID sales than Q4

Call Highlights

- Non COVID revenues has been subdued; never seen May month revenue below April in last 15 years which has occurred in Q1

- Volatility in non COVID business due to high infections resulting in more tests being prescribed

- Handled 5.9mn COVID patients in Q1

M&A

- M&A would go up in areas where DLPL is weaker

- Consumer shift - lot of tests getting consumed online which is a shift from earlier only offline pattern

- Lot of volatility in sales leading to mismatch on valuation expectation in M&A conversation between listed and unlisted players

- Shortage of manpower may lead to rise in staff costs for smaller cos which would shift share to organized market

- Aggregators can be very useful in markets where Dr Lal does not have physical presence

- Not looking at medicine delivery right now though aware new competition is offering a holistic OPD + diagnostic + medicine model

- Few quarters down, expect a more normal wave of growth

Cost & Realization

- Not taken price increases in last 5-6 years

- Home collection costs - net basis it does not increase as lower productivity of phlebotomist (8-10 samples vs 30-40 for walk ins) is offset by savings in real estate, maintenance costs

- Competition for phlebotomist and other quality manpower would go up so needs to watched

Revenue & Margin

- Revenues should come back to pre COVID level trajectory

- Margin should normalize at a higher level due to operating leverage but not at current level

- 12-13% revenues come from home collections

Shares of Dr. Lal Pathlabs Limited was last trading in BSE at Rs. 3716 as compared to the previous close of Rs. 3554.55. The total number of shares traded during the day was 29516 in over 4873 trades.

The stock hit an intraday high of Rs. 3773.35 and intraday low of 3573.45. The net turnover during the day was Rs. 108952363.

Source : Equity Bulls

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