Dr Lal PathLabs Ltd – Stock Analysis

Dr Lal PathLabs Ltd

Dr Lal PathLabs Ltd – Stock Analysis

Best Midcap Stock in Indian Healthcare Industry


In this article, we are going to analyse Dr Lal PathLabs Ltd Stock. Dr Lal PathLabs Limited is one of India’s leading consumer healthcare brand in diagnostic services.

Dr Lal PathLabs Ltd – Stock Analysis

Company Overview

  • Dr. Lal PathLabs is recognized as a centre of innovation and a premier clinical pathology laboratory. It was incorporated on February 14, 1995 at Delhi.
  • It is the largest and most respected diagnostic service provider in the country. The company focuses on providing patients quality diagnostic and related healthcare tests and services. 
  • Here, patients and healthcare providers are offered a broad range of diagnostic and related healthcare tests and services for use in : core testing, patient diagnosis and the prevention, monitoring and treatment of disease and other health conditions.
  • It’s customers include individual patients, hospitals and other healthcare providers and corporate customers.
  • Dr Lal PathLabs has an integrated nationwide network. Its network has coverage across India, including metropolitan areas such as New Delhi, Mumbai, Bengaluru, Chennai, Hyderabad and Kolkata.
Dr Lal PathLabs Ltd - Stock Analysis
Dr Lal PathLabs Ltd – Stock Analysis

Business Overview

  • The company focuses on providing patients quality diagnostic and related healthcare tests and services. The company’s focus on the patient as a customer is a critical differentiator in the diagnostic and healthcare industries.
  • Its diagnostic and related healthcare tests and services include:
    1. Routine clinical laboratory tests – such as blood chemistry analyses and blood cell counts;
    2. Specialized testing services – such as histopathology analyses, genetic marker-based tests, viral and bacterial cultures and infectious disease tests; and
    3. Preventive testing services – such as screenings for hypertension, heart disease and diabetes.
  • It performs these tests and services in its clinical laboratories using sophisticated and computerized instruments.
  • It has Pan-India coverage with 200 clinical laboratories (including National Reference Lab at Delhi & Regional Reference Lab at Kolkata), 2,569 Patient Service Centers (PSCs) and 6,426 Pick-up Points (PUPs).
Test Menu
  1. Routine Testing includes : Bio-chemistry, Hematology, Clinical, Pathology, Microbiology, Basic radiology
  2. Specialized Testing includes : Molecular diagnostics, Flowcytometry, Genetics / Cytogenetics, Histopathology

Robust Financial Performance

Revenue & Profit After Tax
Dr Lal PathLabs Ltd - Key Financials (As on FY2019)
Dr Lal PathLabs Ltd – Key Financials (As on FY2019)
  • Revenue growth is driven primarily by increasing patient volumes and samples. Revenue has increased by CAGR 16.2% from FY2015 to FY2019.
  • Profit after Tax (PAT) has seen a 14.5% CAGR growth over the period from FY2016 to FY2019. The increase in operating margin is due to economies of scale.
  • On account of strong cash flow generation, the company is capable of making the self-funded growth.
  • Cash and cash equivalents holding for FY2019 is around Rs.707 Crore.
Revenue By Geography FY2019
 Dr Lal PathLabs Ltd Geographical Revenue Mix FY2019
Dr Lal PathLabs Ltd Geographical Revenue Mix FY2019
  • North India : Almost 71% of the total revenue is from North India. Dr PathLabs has deepen the presence in North India by developing additional reference labs.
  • East India : East India has contributed about 13% of total revenue in FY2019. Scaling up in East India is done by developing ecosystems via Kolkata reference labs.
  • South & West India : The percentage revenue contribution from South and West India is 6% and 7% respectively. So, Dr PathLabs has targeted an expansion in South and West India by employing the ‘Focused City Approach’.

Key Parameters

  • Current market Capitalization = Rs.9,732 Cr, Mid cap company
  • PE Ratio = 48.92, The stock is having a premium valuation.
  • Major Shareholders :
    1. Promoter Holding = 56.91%, which is a positive sign for the company. And out of the promoters’ stake, there is not any kind pledging of shares.
    2. FII Holding =17.75%
    3. Mutual Funds Holding = 6.62%, around 12 mutual fund schemes are holding the stock, indicates the confidence about the future performance and growth of the company.
  • ROCE = 37.82%
  • ROE = 24.64%
  • Debt to Equity Ratio = 0, As we have seen above, the company’s current net cash position (Cash & cash equivalents = Rs.707 Crore) is expected to fund the next phase of growth. Thus the company is having 0 debt.

Notes :

  • The numbers that are used are approximate and have been rounded for presentation purposes.
  • We are not in any way saying that this is a bad company or that the stock of this company is bad.
  • We are also not suggesting anyone to immediately go and buy this stock or invest in the stock markets.
  • Only an analysis has been presented here. No judgments or final statements are being made here.

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