Dr Lal PathLabs' strong Q4 results, upbeat commentary paints a comeback picture; stock up 8%

Moreover, the management also remains confident of sustaining 26 percent EBITDA margin, and aims to beat FY24 revenue growth of 11 percent (around 3.5 percent pricing) in FY25 excluding the impact of price hikes, reflecting a thrust on volumes and tests per patient.

The upbeat growth targets by the management has ushered hopes of a strong comeback by the diagnostics giant, especially after it suffered with tepid volume growth post COVID amid increased competition from new-age diagnostics players.

Brokerage firm CLSA is also impressed with the double-digit revenue growth guided by the management for FY25, prompting the firm to upgrade the stock to an 'outperform'. CLSA also assigned a price target of Rs 2,590 for the stock.

While competition still poses a threat to volumes, Kotak Institutional Equities expects Dr Lal PathLabs' volume growth to pick up steadily in suburban and tier-3/4 towns, aided by its robust brand recall and customer trust. "An increasingly benign competitive landscape alleviates any major concerns on structural volume growth and margins," the brokerage stated.

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Kotak had previously double upgraded the stock to an 'add' rating with a price target of Rs 2,560.

For JM Financial, the biggest positive from the management's commentary is the fact that they will not take price hikes to achieve their growth targets. Meanwhile, the stock is trading below its average PE, which according to JM Financial makes the risk-reward extremely favourable. "We prefer Dr LalPathLabs as our ‘top pick’ in the sector," the firm stated as it retained its 'buy' call on the stock with a price target of Rs 2,735.

Nuvama Institutional Equities feels that the acceptance of bundled testing seems to be on the rise, which could help it become an important growth driver for Dr Lal PathLabs in medium term. Despite having a positive outlook, Nuvama still chose to wait and see a sustained volume uptick for the diagnostic major before considering the stock for a re-rating. Hence, it held on to its 'hold' call on the stock but slightly raised its price target to Rs 2,600 .

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