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ICICI Securities Report
ICICI Securities has maintained an ‘Add' rating on Dr. Lal PathLabs while cutting the target price to Rs 1,460 from Rs 1,500, implying a modest upside of about 7% from current levels.
According to the brokerage Dr Lal PathLabs' Q4 FY26 revenue growth of 16.6% has exceeded ICICI Securities' expectations. However, Ebitda margin was weak at 26.6% (down 150bps) due to network expansion and promotional costs. In Q4 FY26, it delivered ~12.9% YoY growth in samples (patient volumes +8.8%), while an improved test mix drove a 3.3% increase in revenue per sample.
Management anticipates strong momentum in the Delhi NCR market (targeting double-digit growth) and better traction in Suburban Diagnostics (Suburban) to translate into 13-15% revenue growth for FY27.
Ebitda margin is likely to settle between 27-28% as Dr Lal increases growth-related investments. Network expansion in tier-3 and beyond markets for the pathology biz, a foray into high-end radiology testing, scaling Suburban's network and diversifying geographical presence through M&A are the key near-term priorities.
ICICI Securities cuts FY27-28E earnings per share by 1-3% to factor in lower margins. Retain Add with a lower target price of Rs 1,460 (vs Rs 1,500).
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