Dr. Lal Pathlabs Q4 Results Review - Subdued Volume Outlook: Yes Securities

Yes Securities Report

Dr. Lal Pathlabs Ltd. guided to better FY25 growth than FY24 less the contribution from price hike (~3.5%). Implied volume growth appears to be around 6-7% based on guidance coupled with mix change that would drive hitherto unchanged early double digit growth expectation – only difference being we have cut FY25/26 volume estimate by 4-5% given the weak prognosis and bumped up realisation/patient to capture the upside from mix change.

Dr. Lal Pathlabs to reinvest incremental Ebitda from operating leverage on expansion of labs which would preclude a significant improvement in margin.

Continue to stick to our thesis of lack of volume growth being a major impediment to rerating of multiples which any way is elevated at ~46 times/38 times FY25E/26E basis.

Believe rebound in volumes to above double digit would be a key rerating trigger and till such point we retain our negative view on the stock. Cut our target multiple to 40 times (from 50 times) earlier – bring it inline with that of Vijaya and persistent lack of volume visibility though roll over to FY26 largely negates the impact; our revised target price Rs 2,450 (earlier Rs 2,550) is based on 40 times FY26 earnings per share and acceleration in volumes would be key upside risk to our view.

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