Lal path Labs CMP 2409
Lal path labs operates its own path labs, while collection centres are primarily run on a franchisee model. Though operations are spread across the country, northern India accounts for over 70% of total revenue.
Financial
- ROE and ROCE is around 22% and 32% respectively (Positive)
- Face Value - INR 10, P/BV - 17
- Debt free company
- Forward PE - 65 (Average as per Industry benchmark.
- Operating profit margin is around 28-30%, impacted in Q4FY20 and Q1FY21 due to lockdown impact.
- Q2FY21 topline was around INR 432 Crs Vs. 366 Crs therefore up by 18% YoY.
- Q2FY21 operating profit was around INR 315 Crs Vs. 238 Crs therefore up by 32% in YoY.
- Strong operating cash flows in every quarter. Sound liquidity in the system as debtor realization period is too good.
Key positive / strength
- Leading market position backed by established brand and strong infrastructure network. Pan-India network of 216 clinical laboratories, 3095 patient service centres, and 6995 pick-up points.
- Strong liquidity, networth around INR 932 Cr as of March 2020, driven by healthy cash reserves of Rs 731 crore (Rs 1-2 crore are lien marked against bank guarantees) as on Sep 30, 2020 in form of cash and fixed deposits balance in bank and also market instruments like mutual funds.
- Tie up with various hospital networks for some of the diagnostic test.
Risk/Weakness
- Intense competition in the diagnostic services market, which has several large and small players offering similar services, results in pricing pressure. Strong brand reputation and experience more than 50 years in diagnostic field still sluggish topline growth.
View Share has given strong return after IPO debut in 2016 and it's almost 3x. The good thing about diagnostic chain is leading to increase health care budget, corporate tie ups, new diseases and post Covid ample opportunities and growth. Share has already given breakout above 2350 level and sustained it also. Look like good for short to mid term for 2600/2700. Stronf support at 2250/2180.