Dr Lal Chandani Labs

Stock Opportunities Untested - but worth a good look
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On one hand where Lalpathlab / Thyrocare trades at 100 PE, 10 x sales & 20 x book this little company is trading at 1x sales, 5x earnings & 0.6x book value.

If u do business comparison - Lal chandani lab does collect sample from home services too, cost competitive & NABL accredited.

& even got Approval for COVID-19 Vaccination Centre.

So far in Delhi (5 Labs & 15 collection centers across Delhi/NCR), like Lal Path lab they hav ambition to become pan india as well - they used funds raised through IPO to put up one more lab in Delhi its setup started earning already (P&L hit for short term due to upfront costs).

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They also tried expanding outside Delhi -

I didn’t find any labs in google map in hybd and bangalore - got the below clarification from the management -

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They were primarily B2B but started Pivoting to B2C, However unlike many investors buying Pathlabs at 100 times earnings. They do point out its not a cake walk in their annual report (unlike the 100 PE ones)-
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They are tech enabled - You can do online booking, buying etc (like the 100 PE ones) , here CEO (2nd generation - business started by his father 36 yrs ago) talking about it - Testimonial - Dr. Lalchandani Labs - YouTube

Website doesn’t look like a 10 cr Mcap small lab - https://www.lalchandanipathlab.com/

They are unique in a sense that their labs are fully integrated & give other services like Radiology, ECO etc too.
It has to be seen how they scale but 100 PE Vs 5 PE is just hard to understand-primarily reason is retail r much more rational in pricing stocks Vs institutions.

Reason of value unlock -
new generation promoter looks like is ambitious -
https://linkedin.com/in/mohit-lalchandani-a5799218/

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Services they are offering / their outlets -
Company is NABL Accredited Lab has established itself within Delhi/NCR with 5 (Five) Self-Sufficient Labs and multiple collection centers.
Company Incubates many Fully Automatic Machines from Only reputed Global suppliers like Siemens, Ortho (J&J), Trans Asia, GE etc.

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Company has their own Blood Banking services through its sister concern CPC blood bank founded by Dr A Lalchandani himself in 1987. Our setup at Greater Kailash-Part 1 is having technology in Diagnostics and boasts of being aesthetically one of the most beautiful diagnostic centers in India offering one-stop complete services such as pathology, X-ray, TMT, Ultrasound, 2D-echo, Doctor Consultations, Medical Fitness Examinations etc.

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Company VISION -

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Risks -

Their name got involved in the Mahakumbh scam

ED raids labs in fake Covid-19 testing scam unearthed at Mahakumbh

Got this clarification from the management -

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Looks like they are clear from it (below news) as clarified by Management above - Kumbh Covid scam: Court declares 3 key accused ‘proclaimed offenders’ | Dehradun News - Times of India

Disclosure - Invested.

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Yes i am invested.

I don’t think being a big payers gives you any advantage, What is needed is location & people trust if you have both then a single well maintained lab near by a well known physician can flourish.

Its a very low capex business , Even u can start -
The economics of these business are very similar to Airline business.
Equipments (Airplanes) are available on rent take it , start it, if works out good, if not return it :slightly_smiling_face:

There are other reasons also like - ( go through thread for the argument loosely put that big will keep becoming bigger)

For Eg - all 5 major players are in Delhi still revenue of Lal Chandani lab is growing. 5 Major players should have eaten it away by now if lal chandani lab don’t have any competitive advantage.

Reason is simple when 36 yrs ago they open this lab they built the trust of doctors, hospitals (B2B business) and customers overtime.

Yes, its challenging to expand - it will be very hard to become very big but lets see if this guy able to pull it off. he has scaled it up post IPO by opening 2 more labs, 10-15 collection centres and B2B contract with small hospitals.

On valuations even the current business can grow 7 % CAGR post Fy22 i.e, u are buying it still cheap on Fy22 earnings (which i think going to double).

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Its trading at 10x earnings now…not 5X as you mentioned

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They recently entered b2c space. They might be here to stay but if you see the unorganized sector it is still a huge part. Most pathologies are still not huge in market size. Regarding the 2nd gen promoter : I don’t think he is much qualified. No major achievement or institute under his belt. I think it’s a very risky bet ( at the end of the day you guys are betting on management )

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i don’t think its good idea to judge ones success on this, Lal pathlab , Thyrocare or Metro etc founders don’t have IIT’s or IIMs degree.

look at what he has done so far - i am following it since 2018, he has done a good job scaling up B2C , brining whole IT integration in ( enabled in home sample collection etc ).
and now results will show how well he managed during Covid time ( lets see) .

Its not at all a risky bet, you are buying it at great valuations and this survived for 36 yrs and i don’t see why it won’t survive for next 36 yrs. Due to this history they have labs in great locations , good B2B contacts / long term relationships with small hospitals etc.

I don’t see it highly risky bet , only thing which is in question is how much they will be able to grow the business.
Scaling up is hard in diagnostics business.

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Thank you for the valuable input. Don’t know about the other 2 ( not tracking) but Dr.Velumani was a scientist before he even started the biz. In micro cap , I think it’s very important to bet on jockey therefore I prefer someone with experience or known to have done something great.
Please refer to this tweet ( I think it covers what I am trying to say) : https://twitter.com/leading_nowhere/status/1457323841475149828?t=fGSzHE2Lkqahew86Wbfjjw&s=19

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@AmitContrarian Thanks for starting this thread. Looks interesting. Any idea why Revenues dropped from 4.5 cr(Fy17) to 2.8 cr(Fy18) right after IPO?

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They had some partnership firm till Aug 2017, if you go through DRHP they have stated it clearly and then they re- registers it in Aug 2017 and May be whatever the assets partner took it after that its was 2.05 Cr revenue company by Jan 18.

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This what they mentioned in their AR 2018
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@AmitContrarian If possible, could you please shed some light on why the debtor days are so high at 148? Thyrocare with B2B revenue contribution of around 77% has 33 debtor days and Metropolis with around 56% B2B revenue stands at 45 days. All other listed players seem to have way better cash conversion cycle.

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@AmitContrarian I am sorry but I don’t understand. I fail to see how this should effect the way they recognise revenue. I have gone through the drhp and annual reports and I can’t see any evidence. I am not an expert on accounting but logic dictates that If your asset base has grown from Fy17 to Fy18 then your revenue should grow too.(Ideally under normal circumstances)Maybe you or someone else reading this post can explain this to me.

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You are right, assets have not gone down.
Its confusing pre IPO if we add below Aug 17 + Jan 18 then they should be doing > 4.2 cr in FY18.
and to understand what happen… :slight_smile:

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Only logical answer is may be since it re- incorporated in Aug 2017, they reported Aug to March numbers which is shown in the screener.in and as mentioned in AR below -

I.e, Half yearly numbers for FY18
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So revenue didn’t drop its a half yearly number.

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Good question, may be this is something need to be asked to the promoter.

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Dr. Arjan Lalchandani (MD Path.)

Dr. A Lalchandani (M.D Pathologist) from Banaras Hindu University holds 32 years of rich experience in the field of pathology Vice president of Indian Association of Blood banks Presented paper on “Artificial Blood” at International Society for Artificial Organs at Rhode Island, USA in June 1997 & on “HIV & HbsAg status in India” at SAAR, West Germany in April 1999.

Founded Dr. A Lalchandani Pathology Laboratory in 1986 that has earned a mark of trust and quality from National Accreditation board for testing and calibration Laboratories (NABL). Founded CPC Blood bank since 1987 – one of the first private blood banks in New Delhi

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That makes sense. In that case FY18 sales should be Aug- 17 Number from DRHP Plus FY18 number from Annual report which adds up to 4.95 cr. I have some more questions will compile everything and bother you again: )

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Its breaking out before result - ( someone with insider info buying may be ?)

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Amazing result by DLCL, half yearly EPS is already 5℅ more than What they did full of last.

Cash flows from operations 1.75 cr.
Overall looks good.

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Does the mgmt have any plans of moving this to main board?

They seem to be fulfilling most of the criteria now - 3 yrs listing, 25 crs. mkt Cap ( almost)

Disclosure :- Not invested.

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Is anyone still tracking the company? What could be the reason for such a drastic fall in sales this Qtr. Also company has shown loss in this Qtr is a type of shocker for the investors.any clarifications from companies end.

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Shocks come to the unprepared or those who are narrative based on price-driven.

Seriously good investors study the drivers and are reasonably good in gleaning insights. Mgmts will always have well-articulated reasons for the fall and optimistic outlook. (Dat’s how entrepreneurship survives :stuck_out_tongue: )

M not sure abt ur disclosure but if u’ve invested, these insights should have come from your end.

If u r tracking/ planning to invest in this - I suggest go seek the answers from mgmt and industry. Try reading up other diagnostic cos. reports and u’ll get some idea ( Sm of our VP frnds have dissected Krsnaa diagnostics brilliantly )

Keeping aside the results, thr are 2-3 factors in favor of and against this as an investment case. Seek those and thn let’s discuss over here.

Disclosure :- Tracking. Not invested

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