Apurva Pradhan

Research on Dr. Lal Pathlabs Limited

General overview:
Dr. Lal PathLabs Limited is an international service provider of diagnostic and related
healthcare tests. Based in Delhi, the company offers a broad range of tests on blood, urine,
and other human body viscera.
The main operation of Dr. Lal Path Labs deals with the performing of diagnosis and testing,
including routine tests (including blood tests), specialized tests (e.g., viral, and bacterial
infection tests) and preventive screenings.
Evolution:

1949-2005 2005-2010 2010-2018

Strong position in North

Foundation
1949: Founded by Dr.
Major S. K. Lal
1995: Company
incorporated as Dr. Lal
PathLabs Private Ltd.
2000: Three clinical labs
receive NABL1
accreditation
2001: Received ISO
9001:2008 certification
2002: Received
’International
Accreditation’ from CAP2
Building capabilities for
scale up
2005: onwards:
Investment by
WestBridge Capital
2008: Acquisition of
Paliwal Medicare Private
Limited and Paliwal
Diagnostics Private
Limited
2010: National Reference
Lab set up in Delhi
India, building network in
other geographies
Investment by TA
Associates
Clinical laboratories
expansion in North
region
Growing the business in
East region
Entry into the South and
West regions
Multiple acquisitions to
scale network
Successful IPO listing in
Dec 2015
New Regional Reference
Lab in Kolkata started in
2018
Products:

Bio-chemistry
Hematology
Routine testing Clinical pathology
Microbiology
Basic radiology

Specialized Molecular diagnostics

Flowcytometry
testing Genetics /Cytogenetics
Histopathology

SWOT Analysis:
Strengths:
 Company with No Debt
 Strong cash generating ability from core business - Improving Cash Flow from
operation for last 2 years
 Company able to generate Net Cash - Improving Net Cash Flow for last 2 years
 Annual Net Profits improving for last 2 years
 Book Value per share Improving for last 2 years
 Company with Zero Promoter Pledge
Weaknesses:
 MFs decreased their shareholding last quarter
 Inefficient use of shareholder funds - ROE declining in the last 2 years
 Inefficient use of assets to generate profits - ROA declining in the last 2 years
 Decline in Net Profit (QoQ)
 Decline in Quarterly Net Profit with falling Profit Margin (YoY)
Opportunities:
 Bigger market to capture
 Revenue generation
 Entering into global world
 Professional work
Threats:
 Degrowth in Revenue, Profits and Operating Profit Margin in recent results (QoQ)
 Stocks with high PE (PE > 40)
  Insiders sold stocks
Management Team:

Shareholding pattern:
Holder’s Name No. of Shares % Share Holding
No. of shares 83344877 100%
Promoters 47318230 56.77%
Foreign Institutions 16678170 20.01%
Banks and Mutual Funds 6363186 7.63%
Others 5190994 6.23%
General Public 5002200 6%
Financial Institutions 1922340 2.31%
GDR 869757 1.04%

 No public shareholder holds more than 5% in Dr Lal Pathlabs

 Public shareholders holding more than 1% shares are Westbridge Crossover Fund, Llc
(foreign Company) holding 4.738%, Uti - Equity Fund holding 2.539%, Mirae Asset
Emerging Bluechip Fund 1.759% and Om Prakash Manchanda 1.758% of shares.
Competitors Analysis:
 Company Name Dr. Lal Pathlabs Metropolis Thyrocare
Ltd. Healthcare Ltd. Technologies Ltd.
Market Cap (₹ 7.12 0 9.73
Cr.)
Earnings Per Share 20.16 87.66 17.91
(EPS)
Dividend per share 4.5 0 10
(DPS)
P/E Ratio ) 43.39 0 33.57

BV/share 91.38 367.09 83.96

PAT Growth 10.17 5.51 106.01

Debt/Equity Ratio 0 0 0.02

Return on Assets 21.74 15.29 20.71

(ROA)
Return on Equity 25.08 27.12 22.27
(ROE)
Return on Capital 37.5 38.94 33.55
Employed (ROCE)

 Thyrocare is seen as one of Dr Lal PathLabs's biggest rivals. Thyrocare was founded
in Navi Mumbai, Maharashtra} in 1996. Thyrocare is in the Application Software
field. Compared to Dr Lal PathLabs, Thyrocare generates $43.2M more revenue.
 Metropolis is one of Dr Lal PathLabs's top competitors. Metropolis is headquartered
in Mumbai, Maharashtra, and was founded in 1981. Metropolis competes in the
Health Care Services industry. Metropolis generates 1,186% the revenue of Dr Lal
PathLabs.
Dr. Lal PathLabs at a glance/ Conclusion
 Established consumer healthcare brand in diagnostic services
 Pan-India integrated coverage with 193 clinical labs (including National Reference
Lab1 at Delhi and Regional
 Ref Lab at Kolkata), 2,153 Patient Service Centers (PSCs) and 5,624 Pick-up Points
(PUPs)
 Catalogue of 1,110 test panels, 2,028 pathology tests and 1,561 radiology and
cardiology tests2a
 Collected and processed ~34.7 mn samples from ~15.2 mn patients in FY18; ~29.3
mn samples from ~13.3 mn patients in FY17; ~26.3mn samples from ~12.0mn
patients in FY16
 Customers include individual patients, corporates and institutions, healthcare
providers as well as hospital and clinical labs (lab management)
 ~4,316 employees including full time consultants, pathologists, phlebotomists, and
radiologists
  Q1 FY19: Revenue: INR 2,923 mn; EBITDA: INR 793 mn3 (Margin: 27.1%); PAT:
INR 497 mn (Margin: 17.0%); FY18: Revenue: INR 10,569 mn; EBITDA : INR
2,783 mn (Margin: 26.3%); PAT: INR 1,718 mn (Margin: 16.3%)
The strategy for future growth can be:
1. Strengthen existing operations
 Boosting quality & reliability standards
 Improving turnaround times for testing
 Grow basic radiology practice
 Online initiatives and data analytics
 Investment in branding
2. Expansion in Offering
 Improve breadth of diagnostic testing
 Cutting edge technology
 Preventive healthcare screening
 Chronic & Lifestyle disease management services
 Expand reach in corporate segment
3. Expand management of hospital based and clinical laboratories
 Tap incremental contracts for in sourcing test of hospitals and other clinical
laboratories
 Tap polyclinics
4. Geographic expansion
 Focus city approach
 Consider alliances and acquisitions
 Set up more clinical laboratories
 Set up Regional Reference Laboratories

Analysis:
HOLD THE STOCK