Shares of Dr Lal PathLabs jumped over 5 percent on March 26 after the diagnostics services provider received a "double" upgrade from Kotak Institutional Equities.
The brokerage upgraded the stock to "add" from "sell" and raised fair value (FV) to Rs 2,360 from Rs 1,975, largely led by increased growth estimates beyond FY26, as it built in lower competitive intensity.
Kotak conducted a pricing exercise across seven cities, which indicated a further improvement in pricing trends for the diagnostic players.
The brokerage said even as the pricing differential of listed incumbents with online players stays elevated at 2x-2.6x, "an increasingly benign competitive landscape alleviates any major concerns on structural volume growth and margins of Dr Lal PathLabs and Metropolis."
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Dr Lal PathLabs shares have corrected around 14 percent, so far, this year, which is particularly severe compared to listed peers, according to Kotak Institutional Equities. The correction has been attributed to the exit of the company's CEO.
However, the brokerage said Dr Lal has an able leadership team in place with Om Manchanda as MD and appointment of Shankha Banerjee as CEO would provide continuity.
There has been increasing pricing sanity in 900 diagnostics over the past year. There is an increasingly benign competitive landscape that alleviates any major concerns on structural issues, Kotak said.
In comparison to a one-year forward price-to-earnings premium of 20 percent, Dr Lal PathLabs is now trading at a discount to Metropolis Healthcare, analysts said.
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At 12:28 pm, Dr Lal PathLabs shares were trading at Rs 2,234.65, up nearly 5 percent from the previous close. The revised price target implies a potential upside of 8 percent from March 22 closing levels.
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