Hold Dr. Lal PathLabs; target of Rs 1995: Geojit

Geojit's research report on Dr. Lal PathLabs

Revenue declined by 20.6% YoY in Q1FY21, impacted by lock down during the quarter with some recovery in June (+14% YoY). COVID-19 contributed 21% to top line with 1.97lac tests. Realization per patients improved to Rs. 760 (vs. Rs. 685 in Q1FY20), driven by COVID-19 tests. Management plans to add 3-4 facilities to conduct COVID-19 tests apart from 3 existing facilities. EBITDA declined by 49.2% negatively impacted by lower revenues and higher employee expenses (+2.1% YoY). The company's growth in COVID business, strong brand recall, gradual unlock of cities should support growth in upcoming quarters.

Outlook

Given the limited upside potential we downgrade our rating to HOLD with a revised target price of Rs. 1,995 based on 53x FY22E EPS.