What happened imo was the super crisp results circulating. Socialmedia effect.
**"DR. LAL PATHLABS: Q1 CONS NET PROFIT 1.31B RUPEES VS 284M (YOY);EST 910M | 834M (QOQ) || Q1 REVENUE 6.07B RUPEES VS 2.66B (YOY); 4.31B (QOQ)
DR. LAL PATHLABS:Q1 EBITDA RUPEES 1.9B VS 473M (YOY); 1.2B(QOQ) || Q1 EBITDA MARGIN 31.16% VS 18.55% (YOY); 28.26% (QOQ)"**
In Labs, now what is important is Non Covid, QoQ growth and YoY.
Although what was circulated across was combined(Covid+ NonCovid) which was bound to look solid considering the 2nd wave.
Hence even Dr lal was 9% up and slowly as the presentation was out, on non covid growth piece things started to cool on Dr lal and metro both. Metro was also up 3% after Dr lal results, closed 7% lower.
However QoQ Non Covid from Dr lal was 3.2% considering Slow May due to peak of 2nd wave. Patients defer the discretionary tests. I feel even the QoQ was decent considering the tough 2nd wave which had bought everything to standstill.
My thoughts on suburban Deal (Cash funded with no equity dilution vs metro taking board resolution for QIP) . This deal is similar to what they did in Pune, Dr lal has a very strong brand image in Pune. For bombay, they had to acquire an asset for quick expansion and creating brand image.
One should be prepared for QoQ margin dilution in short term, till the time synergies play out. this is because suburban has a lower margin vs Dr Lal.
Imo, the synergies over 5 year horizon will be super immense.
Dr Om Manchanda has a terrific track record of good capital allocation, not overpaying at any cost. Also, if one sees, Cash was earnings just 4%-5%.
This deal will generate EBITDA of 50-60 crores(without synergies )and hence ROCEs on this would be 5-6%, infact better returns vs cash lying idle on B/s.
However over long term, the benefits would flow from :
Stronger grip on the market which cash couldnāt have got, an idle asset. Margins will tend to inch up with scale benefits. Suburban is very small vs Dr Lal hence margins will improve when integration with Dr Lal Fructifies.
Also, the Deals lately have been at higher P/S, which is actually good in a sense. These P/S will now set benchmarks for future deals and smaller diagnostics players will not be able to acquire such assets at such multiples.
If Lal Pathlab pays the same to acquire Dr Lal Chandani Labs ( Moat - lab in premium locations in Delhi) i.e, 18x EBITA then Lal Chandani should be trading around 36 cr Mcap based on FY21 EBITA of 2 cr. ( its trading at 10 cr Mcap )
I think for larger players to grow they have acquire good , establish smaller players who have local advantage due their establishment in 1980s like in case of Dr lal chandani.
Post IPO they have used the funds for enabling IT infra, opening 4-5 more labs and collection centres , i think this half-yearly we will see the fruits of it.
Hello
I was checking Dr. Lal Pathlabs stock, its a fundamentally strong company. While comparing it with peers, I was checking a few startups. A person can book tests using 1mg (Tata owned), netmeds (Reliance owned) and practo, in addition to Metropolis and Thyrocare. As far as i know 1mg have their own labs.
If a user has 1mg/netmeds/practo app on their phone, why would he/she install dr lal app, since these players provide doctor consultation, medicine delivery in addition to lab tests. What will be impact of these comapnies on Dr Lal. Please give your thoughts. Thanks.
The moat of Lal paths ā¦SRLā¦metrpolis is built around the trust factor thst they haveā¦
Its almost a normal routine for a doctor to suggest that we get tests done from above mentioned labsā¦
On ocassions,i have noticed some doctors even suggest getting re-tested (if readings seem peculiar n test report is from an āunbranded or untrustedā lab)
These 3 companies command a good share because of the trust and brand building they have done in testingā¦
as a platformā¦online pharmacy will probably continue growing rapidlyā¦.but probably just for selling medicinesā¦
Also, initially low price may attract customers, but the accuracy of report matters a lot, since it is based on your reports, your medicine dosage is dependent. E.g. Just by showing a person diabetic is not sufficient, the accurate level decides the dose whether it is 1mg,3mg etc.
To add on : Thyrocare has been charging less since long time vs these guys, still these guys have grown at a healthy rate, again thyrocare is not accepted by doctors.
It is not always a machine based reports, good talent/doctors is needed to verify the reports in case of beyond range values.
The online players follow a cashburn model but this is not sustainable imo. To give an example, prices by Uber/ola is now similar to any normal cab vs if you compare 3 years ago. Low economics is accepted but no economics is never sustainable.
To generate decent margins and healthy sustainable return ratios, you need to charge reasonably and have scale. Suburban despite charging higher than Dr Lal on most tests makes an EBITDA of 16% vs 28% for Dr Lal.
Dr Lal path lab is the oldest lab in Indiaā¦when one of my relative was admitted in Apollo hospital, Delhi sometimes in 2005, the blood sample was sent to Dr lal path Lab for a critical test which Apollo was unable to do in their own lab.
Then I was trying to find out more about Dr lal path lab.
Dr. Lal Path Labs was started in 1949, by the late Dr. S. K. Lal. The first laboratory was set up by Dr. S.K Lal in Delhi, India.
Dr. Lal was a Junior Doctor in the British Indian Army, studied pathology from the Armed Forces Medical College in Pune with additional training in pathology in cook country hospital in Chicago.
Over a period of last 72years , Dr lal path lab has been able to establish its reputation of being the most trustworthy and reliable Pathology lab , first in North and now spreading its wing all.over the country after it went public in 2015. Even today, many hospitals are referring all critical tests to Dr lal path lab at its Delhi Lab.
In my family , we have never tested our pathological tests any where except Dr lal path lab.
You may read the history from the wiki below.
Discl: Investedā¦may be biased.You may please do your own assessment before investing.
If it is ok could you share was there really difference in your Thyrocare and Dr Lal? This industry is more driven by Doctors trust/preference and it is very common to have second test report when some new condition is diagnosed ā it is always safe practice.
Note: I have used Thyrocare and Dr Lal could not find any significant difference in the result.
One of my friend used to work as a branch manager for one of the diagnostics chain. His job was mostly handling complaints from end customers everyday. That particular branch he worked for had 1 or 2 stars rating on Google with vey few reviews. And the same company branch at different location had 4.6 average Google rating with much more reviews. But both branches just collect the sample and send to SAME hub.
I work in a support role for a MNC my experience has been most people can think only in binary.Very bad or good.
There are multiple reasons for you to get wrong results, some times people mix your samples with others(yes that can happen a lot), sometimes chemicals used have issue few these I heard.
My opinion for simple sugar tests 9 out of 10 times all the diagnostic chains get the results right and same.
This is no noise Chart. 28% growth in Non Covid Revenues (Revenues which are sticky). Excellent execution.
QoQ Non Covid 3% degrowth (in my opinion ) since their Lab in Bombay(Dadar) was shut for 8-10 days due to Technicians testing positive, there was disruption in their normal business.
Next few quarters, noise around suburban consolidation impacting margins in short term in expected.
They have explained the margins reduction is due to one time acquisition cost, Notional depreciation on suburban acquisition. Their normalised EBITDA margin is 28.5% (explained in presentation)
Been through few google user reviews for Karnataka region as it was discussed in the recent con-calls and management seems to be quite positive on centers in Bangalore.
The user reviews tells a different story though (mentioning a few of them)
Sample collectors being inexperienced.
Delay in the reports of Covid test even when requested by customers for travel purpose.
Staff not reaching on time to collect samples.
Staff behaving rudely to customers.
Well I understand that there will be a few unhappy customers for business of this scale but when business is setting up new centers it should be more focused on positive user experience as it can be a real differentiator in a business where competition is bound to increase.
Also from con call I felt there is a reluctance in changing the name of acquired suburban diagnostics in Mumbai region to Dr. Lal Path labs as clearly management lacks any plans currently.
Is it due to good reputation that Suburban carries in compared to average ratings of Dr. Lalās?
Diagnostic space is going to be competitive and Dr. Lalās strategy is to grow by volume. For the next leg of growth it needs to be more focused on user experience as once the user faces a problem there will be another diagnostic player sitting to eat the pie.
With increase in geographical presence, operational challenges will increase. How management actually manages will decide the fate when the competition game plays out.
Disc:-
Currently invested in business but in dilemma whether to increase the position as stock has corrected a lot.
Canāt agree more. Thanks @Deepankar for sharing the experience from Karnataka region. The competition is very high and as your rightly mentioned it all boils down to volume growth with good customer experience. In TN as well, Dr. Lal Path Labs is yet to establish itself as a prominent player. Medall (Precision diagnostics) has good coverage and the overall experience is also good (I have been using their services for the past 5 years but some concerns were raised against them as well w.r.t COVID test results). Dr. Lal Path is still concentrated in the Northern part of India and for any further growth, they should have a clear expansion strategy for the southern states where the diagnostic spend is gaining momentum.
Disc: Added a tracking position during the recent correction.
