Dr. Lal Pathlabs Q1 Results Review - Lack Of Volume Precludes Constructive Stance: Yes Securities

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Yes Securities Report

Dr. Lal Pathlabs Ltd. reported a rather sharp margin surprise despite lackluster volumes which was traced to price hikes taken in some of the commonly ordered tests. Albeit the all important volume metric continues to be lackluster, and all the growth was driven by realisation and mix improvement.

As competitive intensity settles to a new normal which is higher than that prevalent during pre-Covid times, pricing as a lever cannot be relied upon to drive growth.

Also, Q1 had a higher growth rate in Delhi NCR which would have presumably come with better margin; as rest of India picks up, margin too would trend lower in next one-two quarters.

With little visibility on volume pick up and still simmering competition, we do not see reason to change our stance; similarly, Q1 numbers were largely in line and with margin likely to trend lower, reckon our earnings remain largely unchanged barring assumption of higher other income.

Roll over 50 times multiple to FY25 and retain 'Reduce' with revised target price Rs 2,300 (earlier Rs 1,875).

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