ICICI Securities research report on Dr Lal Pathlabs
Dr Lal PathLabs’ (Dr Lal) Q2FY25 revenue growth of 9.8% YoY was lower than our expectation, though its better EBITDA margin of 30.7% was a surprise. Q2FY25 growth was driven by its bundled test package Swasthfit, which rose 25% YoY and accounted for 24% of revenue (vs. 22% last year). Suburban continues to demonstrate better growth (11.6% YoY) while its margins touched 20% in Q2FY25 (up 650bps YoY). Ahead, management is focusing on boosting volume growth and may refrain from taking price hikes in the near term. Cash balance of INR 10bn may be utilised for M&A to improve its presence in south India and other fast-growing cities.
Outlook
We cut our FY25E/FY26E EBITDA by ~4%/5% to factor in moderate revenue growth. Retain HOLD with a lower target price of INR 3,100.
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