RESULT

Dr Lal Pathlabs (DLPL) SELL

Health Care Services
CMP(₹): 1,906 Fair Value(₹): 1,525 Sector View: Attractive NIFTY-50: 18,297 May 11, 2023

Growth narrative adequately priced in Company data and valuation summary

DLPL’s 4QFY23 PAT missed KIE estimates by 9% primarily due to lower- Stock data
than-expected volume growth. On a low base, non-Covid sales grew ~14%
CMP(Rs)/FV(Rs)/Rating 1,906/1,525/SELL
yoy, lower than our estimate of 20% yoy. Furthermore, traction in Suburban
52-week range (Rs) (high-low) 2,750-1,762
stays lower than expectations. In our view, increasing sanity in diagnostics
Mcap (bn) (Rs/US$) 159/2
pricing is well-captured in the recovery built in our estimates for DLPL
ADTV-3M (mn) (Rs/US$) 371/5
(14%/15% sales/adjusted EBITDA CAGR over FY2023-25E). At ~52X
FY2024E EPS, valuations remain elevated. Retain SELL rating with a Shareholding pattern (%)
reduced FV of Rs1,525.
6.9
9.5
Excluding Suburban, non-Covid sales grew 13.7% yoy in 4QFY23
2.3
3.3
DLPL’s 4QFY23 sales at Rs4.9 bn (flat yoy and qoq) missed our estimates by
55.0
4%. In effect, ex-Suburban non-Covid sales at Rs4.4 bn grew 13.7% yoy. While 23.1
reported EBITDA at Rs1.2 bn (EBITDA margin of 23.5%) missed our estimates
by 9%, adjusted for provisions, the EBITDA miss was at 3%. Realization per
patient stood at Rs773 in 4QFY23 (+7% yoy) aided by price hikes in the semi- Promoters FPI s MFs BFIs Retail Others

specialized and specialized portfolio (~50% of overall sales) in Feb 2023. As

Price performance (%) 1M 3M 12M

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
per our analysis, the largest price hike (~4% on KIE’s overall sample test
Absolute 2 (3) (17)
bouquet) for DLPL has been in Delhi NCR. Given that these hikes have Rel. to Nifty (1) (6) (30)
happened after a few years, it will be interesting to see their impact on DLPL’s
sagging volume growth in Delhi NCR. Despite the price hikes, we caution that, Forecasts/Valuations 2023 2024E 2025E
as the non-metro mix increases, there can be further pressure on margins. EPS (Rs) 29.3 36.5 45.2
EPS growth (%) (29.3) 24.8 23.7
DLPL aiming for a faster scale-up of Suburban in FY2024 P/E (X) 65.1 52.2 42.2

With the Covid mix becoming negligible and losses from the new Vidyavihar P/B (X) 9.5 8.8 8.0

lab coming in, Suburban’s EBITDA margins remained subdued at 11.2% in EV/EBITDA (X) 31.3 26.6 22.6

4QFY23. DLPL plans to increase Suburban’s sales, led by a wider test menu, RoE (%) 15.4 17.5 19.8
Div. yield (%) 0.6 1.0 1.3
adding franchisees, boosting doctor connect and leveraging its strong
Sales (Rs bn) 20 23 26
positioning in the corporate segment. The new lab will be instrumental in
EBITDA (Rs bn) 5 6 7
scaling up Suburban’s test mix toward specialty compared with a high
Net profits (Rs bn) 2 3 4
dependence on routine tests currently. We build in 14% sales CAGR for DLPL
over FY2023-25E, baking in a sharper ramp-up for Suburban owing to the Source: Bloomberg, Company data, Kotak Institutional Equities estimates

above factors. Prices in this report are based on the market close of
May 11, 2023
Volume recovery still awaited; retain SELL with lower FV of Rs1,525
Despite the recent pricing actions, pricing of incumbents such as DLPL stays
2-3X higher than the cheapest organized alternative across cities, even for
specialized and semi-specialized tests. Given the high pricing differential, we
stay guarded on any meaningful advantage to listed incumbents even if
competitive intensity from online players ebbs. Apart from pricing, there can
be additional pressure on DLPL’s margins due to heightened marketing Related Research

expenses as well as tech investments. We lower DLPL’s FY2024-25E EPS by → Diagnostics: A silver lining
1-5% to reflect prolonged non-Covid volume recovery. Our DCF-based FV of → DLPL: Behind the scenes
Rs1,525 (Rs1,570 earlier) implies 10-year sales and pre-Ind AS-116 EBITDA → DLPL: The volume growth conundrum
CAGR of 12.8% and 13.6%, respectively. Maintain SELL.

Full sector coverage on KINSITE

Alankar Garude, CFA Samitinjoy Basak

 2

DLPL—4QFY23 interim results

Exhibit 1: March fiscal year-ends, 2022-24E (Rs mn)
chg. (%) chg. (%) chg. (%)
4QFY23 4QFY23E 4QFY22 3QFY23 %KIE %yoy %qoq FY2023 FY2022 yoy FY2024E FY2023 yoy
Net sales 4,910 5,110 4,855 4,894 (3.9) 1.1 0.3 20,169 20,874 (3.4) 23,054 20,169 14.3
Cost of materials (1,059) (1,145) (1,139) (1,109) (7.5) (7.0) (4.5) (4,472) (5,023) (11.0) (5,306) (4,472) 18.6
Gross profit 3,851 3,966 3,716 3,785 (2.9) 3.6 1.7 15,697 15,851 (1.0) 17,748 15,697 13.1
Employee benefit expense (925) (995) (975) (963) (7.0) (5.1) (3.9) (3,765) (3,648) 3.2 (4,179) (3,765) 11.0
Fee to collection centres (688) (700) (582) (693) (1.7) 18.2 (0.7) (2,820) (2,845) (0.9) (3,112) (2,820) 10.4
Other expenses (1,082) (1,005) (948) (999) 7.7 14.1 8.3 (4,213) (3,750) 12.3 (4,754) (4,213) 12.9
EBITDA 1,156 1,266 1,211 1,130 (8.7) (4.5) 2.3 4,899 5,608 (12.6) 5,702 4,899 16.4
Depreciation (376) (395) (377) (379) (4.8) (0.3) (0.8) (1,502) (1,081) 38.9 (1,654) (1,502) 10.1
EBIT 780 871 834 751 (10.5) (6.5) 3.9 3,397 4,527 (25.0) 4,048 3,397 19.2
Other income 142 100 120 105 42.0 18.3 35.2 417 525 (20.6) 470 417 12.7
Finance expense (90) (95) (119) (91) (5.3) (24.4) (1.1) (375) (303) 23.8 (380) (375) 1.3
Profit before tax 832 876 835 765 (5.0) (0.4) 8.8 3,439 4,749 (27.6) 4,138 3,439 20.3
Profit before tax (adjusted) 832 876 835 765 (5.0) (0.4) 8.8 3,439 5,075 (32.2) 4,138 3,439 20.3
Tax expense (263) (245) (214) (229) 7.2 22.9 14.8 (1,028) (1,246) (17.5) (1,059) (1,028) 3.1
Net profit 569 631 621 536 (9.8) (8.4) 6.2 2,411 3,503 (31.2) 3,079 2,411 27.7
Minority interest (2) (8) (8) (8) (75.0) (75.0) (75.0) (22) (55) (60.0) (35) (22) 59.1
Net profit after minority 567 623 613 528 (9.0) (7.5) 7.4 2,389 3,681 (35.1) 3,044 2,389 27.4
Number of shares 83 83 83 83 83 83 83 83
EPS (Rs mn) 6.8 7.5 7.3 6.3 (9.0) (7.5) 7.4 28.6 41.3 (30.7) 36.5 28.6 27.4

Gross margin (%) 78.4 77.6 76.5 77.3 83 bps 189 bps 109 bps 77.8 75.9 189 bps 77.0 77.8 -84 bps
EBITDA margin (%) 23.5 24.8 24.9 23.1 -123 bps -140 bps 45 bps 24.3 26.9 -258 bps 24.7 24.3 44 bps
Staff costs to sales (%) 18.8 19.5 20.1 19.7 18.7 17.5 18.1 18.7
Collection centres fees to sales (%) 14.0 13.7 12.0 14.2 14.0 13.6 13.5 14.0
Other expenses to sales (%) 22.0 19.7 19.5 20.4 20.9 18.0 20.6 20.9
Adjusted PAT margin (%) 11.5 12.2 12.6 10.8 -64 bps -108 bps 76 bps 11.8 17.6 -579 bps 13.2 11.8 136 bps
Tax rate (%) 31.6 28.0 25.6 29.9 29.9 26.2 25.6 29.9
Operational data
Number of tests (mn) 17.6 17.9 16.3 17.3 (1.8) 8.0 1.7 72.3 68.2 6.0 82.3 72.3 13.8
Realizations/test (Rs) 279 285 298 283 (2.1) (6.3) (1.4) 279 306 (8.9) 280 279 0.4
Number of patients (mn) 6.4 6.7 6.7 6.5 (5.2) (5.2) (2.3) 27.0 27.3 (1.4) 31.2 27.0 15.9
Realizations/patient (Rs) 773 763 725 753 1.4 6.7 2.7 748 764 (2.1) 738 748 (1.4)
Tests/patient 2.8 2.7 2.4 2.7 3.6 13.9 4.1 2.7 2.5 7.5 2.6 2.7 (1.8)
Segmental performance
COVID revenues (Rs mn) 109 90 658 113 21.1 (83.4) (3.5) 628 3,953 (84.1) 259 628 (58.7)
Non-COVID revenues (Rs mn) 4,801 5,020 4,197 4,781 (4.4) 14.4 0.4 19,541 16,921 15.5 22,795 19,541 16.7

Source: Company, Kotak Institutional Equities estimates

Key highlights from DLPL’s 4QFY23 concall:

4-year CAGR: 4-year organic non-Covid sales CAGR for DLPL stood at 10.7% in FY2023. Other industry
peers are also seeing similar growth rates. Management expects this growth rate to sustain.

EBITDA margin guidance: The company expects to sustain current level of EBITDA margins in FY2024E,
despite increasing contribution from Swasthfit, and expansion outside Delhi NCR.

Price hikes: As per DLPL, the price hikes taken in February 2023 have not been for routine tests. The
price hikes have been relatively well-absorbed. DLPL expects a 250 bps benefit of these hikes on overall
revenues on an ongoing basis (170 bps benefit in 4QFY23).

Volumes: DLPL reported 6.3 mn patient visits in 4QFY23. In FY2023, it had a total of 26.9 patient visits.

Industry: Both incumbents as well as new entrants are reaching a situation wherein companies,
especially smaller ones, might have to take price hikes to maintain margins. Consolidation of the market
is still ongoing. However, elevated valuation expectations and unavailability of attractive assets make
the process of consolidation challenging.

B2B: While the B2B space remains as competitive as ever, DLPL has grown well in B2B. Also, DLPL’s
channel management program has been proceeding well.

Dr Lal Pathlabs
Health Care Services India Research
 3

Suburban: Suburban generated sales of Rs387 mn in 4QFY23, with 6% Covid contribution. In FY2023, it
generated total revenues of Rs1.6 bn with Rs90 mn Covid test sales. 80% of Suburban’s sales come from
Mumbai. Suburban’s EBITDA margins stood at 11.2% in 4QFY23, versus 7% in 3QFY23 and 18% in
2QFY23. On an annual basis, Suburban posted EBITDA margins of 12% in FY2023. DLPL faced
challenges in Suburban in FY2023 due to lower Covid contribution, without accompanying decrease in
costs. DLPL is looking at further integration of Suburban and DLPL’s test menu.

Swasthfit: Swasthfit contributed 22% of overall sales in 4QFY23. Swasthfit sales stood at Rs3.73 bn in
FY2023. Swasthfit is growing well as consumers are opting for more tests, as they are seeing greater
value for money in packages.

Home collection: DLPL differentiates itself from online players in terms of medical care. ~9% of sales
come from home collection, which has increased from 5% levels prior to Covid. Home collection is a
capacity-constrained business, which operates best between 6 AM and 10 AM. As per DLPL, home
collection is a channel of convenience, and any company will face several challenges if this is its primary
business.

Mature, growth and emerging markets: Delhi NCR contribution stood at 32% in FY2023, versus 34% in
FY2022. DLPL expects to improve growth in its mature market of Delhi NCR back to pre-Covid levels in
FY2024. As per DLPL, the East India market offers huge potential for growth. DLPL also plans to be well-
placed in West India over the medium term.

Expansion in Tier 2/3 markets: DLPL plans to add 10-15 labs annually, mainly in Tier 2 and below cities.

Labs: DLPL operates 277 labs as of end-FY2023.

Variable model: As per the model, DLPL pays the phlebotomists as per pick-up, instead of fixed
contracts.

Staff costs: There was a yoy decline in employee expenses due to lower RSU costs.

Rental costs: Rental costs accounted for ~2.5% of sales in 4QFY23.

Digital investments: From a tech perspective, DLPL has made significant investments. It has increased
its IT investments by 2X in the past few years. It launched new digital programs including personal
recommendation engine and digital wallet.

Provisions: DLPL is hopeful that the amount outstanding from BMC, for which it has created a provision,
will be received very soon.

Tax rate: 25% in FY2024E.

DLPL—4QFY23 highlights: Slower non-Covid traction leads to operating miss

DLPL’s 4QFY23 sales at Rs4.9 bn (flat yoy and qoq) missed our estimates by 4%. In effect, non-Covid
sales at Rs4.8 bn (+14% yoy) fell short of our estimates by 4%. Realizations per patient stood at Rs773
in 4QFY23 (+3% qoq), owing to price hikes in the specialized portfolio. We note there is no incremental
adjustment for the Suburban acquisition from 4QFY23 as it is now fully in the base. Revenues in 4QFY23
include Rs387 mn sales from Suburban (Rs363 mn non-Covid sales, Rs24 mn Covid sales), compared to
Rs373 mn sales in 3QFY23 (Rs346 mn non-Covid sales, Rs27 mn Covid sales). Gross margins for
4QFY23 stood at 78.4% (+109 bps qoq, +83 bps versus KIE). Staff costs declined by 5% yoy, on account
of lower RSU costs. EBITDA stood at Rs1.2 bn, missing our estimates by 9% (+2% qoq). EBITDA margin
stood at 23.5%, up 45 bps qoq (-123 bps versus KIE). EBITDA included an exceptional item of Rs70 mn,
on account of provisions largely for BMC. Adjusted for this, EBITDA stood at Rs1.2 bn (-3% versus KIE),
with margins of 25.0% (+188 bps qoq). Reported PAT stood at Rs567 mn (-9% versus KIE, +7% qoq).

Dr Lal Pathlabs
Health Care Services India Research
 4

We are building in 13.6% non-Covid patient volume CAGR over FY2023-25E

Exhibit 2: DLPL—revenue split, March fiscal year-ends, 2018-26E (Rs mn)

2018 2019 2020 2021 2022 2023 2024E 2025E 2026E

Non-COVID
Patient volumes (mn) 15.2 17.6 19.4 18.8 24.6 26.6 30.4 34.3 38.8
Growth (%) 14.3 15.8 10.2 (3.0) 30.7 8.1 14.2 13.0 13.0
Realizations (Rs) 695 684 686 687 688 735 750 756 762
Revenues (Rs mn) 10,569 12,034 13,304 12,933 16,921 19,541 22,795 25,951 29,541
COVID
Patient volumes (mn) — — — 1.6 3.1 1.7 0.9 0.5 0.5
RT-PCR (mn) — — — 1.5 2.3 1.1 0.7 0.4 0.4
Allied tests (mn) — — — 0.2 0.9 0.6 0.1 0.1 0.1
Realizations (Rs) 1,748 1,262 369 300 300 300
RT-PCR (Rs) — — — 1,716 1,059 237 300 300 300
Allied tests (mn) — — — 2,024 1,795 628 300 300 300
Revenues (Rs mn) — — — 2,880 3,953 628 259 151 151
RT-PCR (Rs mn) — — — 2,540 2,402 266 216 108 108
Allied tests (mn) — — — 340 1,551 362 43 43 43

Consolidated revenues (Rs mn) 10,569 12,034 13,304 15,813 20,874 20,169 23,054 26,102 29,693
Revenue growth (%) 15.8 13.9 10.6 18.9 32.0 (3.4) 14.3 13.2 13.8

Source: Company, Kotak Institutional Equities estimates

Average pricing of DLPL is 2-3X higher than the cheapest organized alternative across seven major cities as of March 2023
Exhibit 3: Average pricing premium of DLPL, METROHL & SRL over the cheapest organized competitor, March fiscal year-end, 2023 (X)

3 Dr Lal Metropolis SRL Thyrocare

2.5 2.4
2.3 2.3
2.2 2.2 2.2 2.2
2.1 2.0 2.1 2.1 2.1 2.1
2.0 2.0 2.0 2.0 2.0 2.0 2.0
2 1.9

1.5 1.4 1.4 1.4 1.4 1.4 1.4 1.4

0.5

0
Mumbai Delhi NCR Chennai Kolkata Hyderabad Bengaluru Pune

Source: Company, Kotak Institutional Equities

Dr Lal Pathlabs
Health Care Services India Research
 5

We reduce our FY2024-25E EPS by 1-5%, largely due to prolonged volume recovery and slightly lower margins
Exhibit 4: DLPL—changes in estimates, March fiscal year-ends, 2024-26E (Rs mn, %)

New estimates Old Estimates Changes %

2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
Sales 23,054 26,102 29,693 23,335 26,921 (1.2) (3.0)
Gross profits 17,748 20,137 22,935 17,954 20,680 (1.1) (2.6)
Gross margin (%) 77.0 77.1 77.2 76.9 76.8 4 bps 33 bps
EBITDA 5,702 6,599 7,606 5,775 6,892 (1.3) (4.2)
EBITDA margin (%) 24.7 25.3 25.6 24.7 25.6 -1 bps -32 bps
PAT 3,044 3,765 4,523 3,062 3,946 (0.6) (4.6)
EPS (Rs) 36.5 45.2 54.3 36.8 47.4 (0.6) (4.6)

Source: Company, Kotak Institutional Equities estimates

We value DLPL at Rs1,525 per share

Exhibit 5: DLPL—DCF model, March fiscal year-ends, 2021-40E (Rs mn)
2021 2022 2023 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E 2036E 2037E 2038E 2039E 2040E
Net sales 15,813 20,874 20,169 23,054 26,102 29,693 33,688 38,121 43,022 48,424 54,359 60,614 67,135 73,853 80,689 87,553 94,126 100,250 106,265 112,110
YoY (%) 18.9 32.0 (3.4) 14.3 13.2 13.8 13.5 13.2 12.9 12.6 12.3 11.5 10.8 10.0 9.3 8.5 7.5 6.5 6.0 5.5
EBITDA (pre Ind-AS) 4,019 5,246 4,519 5,304 6,181 7,166 8,153 9,225 10,411 11,719 13,155 14,669 16,247 17,872 19,527 21,188 22,778 24,261 25,716 27,131
Margin (%) 25.4 25.1 22.4 23.0 23.7 24.1 24.2 24.2 24.2 24.2 24.2 24.2 24.2 24.2 24.2 24.2 24.2 24.2 24.2 24.2
Depreciation (Ind-AS adj.) 408 665 925 1,018 1,106 1,194 1,292 1,409 1,541 1,690 1,857 2,044 2,251 2,481 2,732 3,005 3,301 3,617 3,952 4,307
EBIT 3,611 4,581 3,594 4,285 5,075 5,972 6,860 7,816 8,870 10,029 11,298 12,625 13,995 15,392 16,795 18,183 19,478 20,644 21,764 22,823
Margin (%) 22.8 21.9 17.8 18.6 19.4 20.1 20.4 20.5 20.6 20.7 20.8 20.8 20.8 20.8 20.8 20.8 20.7 20.6 20.5 20.4
EBIT (1-tax) 2,402 3,012 2,397 3,188 3,775 4,443 5,104 5,815 6,599 7,461 8,406 9,393 10,412 11,451 12,495 13,528 14,491 15,359 16,192 16,980
Capex (627) (941) (365) (800) (800) (800) (1,011) (1,144) (1,291) (1,453) (1,631) (1,818) (2,014) (2,216) (2,421) (2,627) (2,824) (3,008) (3,188) (3,363)
% of revenues (%) 4.0 4.5 1.8 3.5 3.1 2.7 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0
Change in WC 464 146 297 74 78 92 230 252 276 301 327 340 349 354 354 349 325 294 282 266
FCFF 2,647 2,882 3,254 3,480 4,160 4,929 5,615 6,333 7,126 7,999 8,959 9,958 10,999 12,070 13,161 14,255 15,294 16,262 17,238 18,191
Discount factor 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00
Discounted free cash 3,254 3,480 3,722 3,947 4,024 4,061 4,089 4,107 4,116 4,094 4,047 3,974 3,877 3,758 3,608 3,433 3,257 3,075

WACC (%) 11.75 WACC (%)

Terminal growth (%) 5.5 1,526 10.50 11.00 11.50 12.00 12.50
Discounted free cash flow 67,926 4.0 1,682 1,555 1,447 1,353 1,270
Terminal value 51,912 Terminal 4.5 1,744 1,606 1,487 1,386 1,297
Enterprise value 119,838 growth 5.0 1,818 1,664 1,534 1,424 1,328
Less: Net debt (7,546) rate (%) 5.5 1,906 1,733 1,589 1,467 1,364
6.0 2,015 1,816 1,653 1,518 1,405
Equity value 127,373
No. of shares 83
Equity value per share (Rs) 1,526

Source: Company, Kotak Institutional Equities estimates

Dr Lal Pathlabs
Health Care Services India Research
 6

We expect DLPL to deliver 14% revenue CAGR over FY2023-25E

Exhibit 6: DLPL—summary financials, March fiscal year-ends, 2016-26E (Rs mn)
2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Net revenues 7,913 9,124 10,569 12,034 13,304 15,813 20,874 20,169 23,054 26,102 29,693
Gross profit 6,184 7,153 8,309 9,410 10,317 11,840 15,851 15,697 17,748 20,137 22,935
EBITDA 2,097 2,365 2,640 2,936 3,436 4,363 5,608 4,899 5,702 6,599 7,606
EBITDA (adjusted) 2,097 2,365 2,640 2,936 3,436 4,363 5,608 4,969 5,702 6,599 7,606
Depreciation & amortisation (283) (282) (331) (382) (728) (772) (1,081) (1,502) (1,654) (1,742) (1,830)
EBIT 1,815 2,084 2,309 2,554 2,708 3,591 4,527 3,397 4,048 4,857 5,776
Net interest income 193 249 304 452 397 353 222 42 90 250 350
Profit before tax 2,007 2,333 2,613 3,006 3,105 3,944 4,749 3,439 4,138 5,107 6,126
Tax and deferred tax (675) (781) (895) (1,001) (829) (979) (1,246) (1,028) (1,059) (1,307) (1,568)
Less: minority interest (10) (10) (10) (13) (17) (49) (55) (22) (35) (35) (35)
Net income 1,322 1,542 1,708 1,992 2,259 2,916 3,448 2,389 3,044 3,765 4,523
Net income (adjusted) 1,328 1,542 1,708 1,992 2,259 2,916 3,448 2,438 3,044 3,765 4,523
Weighted avg. no. of shares (mn) 68.5 83.5 83.5 83.5 83.3 83.3 83.3 83.3 83.3 83.3 83.3
EPS (adjusted) (Rs) 19.4 18.5 20.5 23.9 27.1 35.0 41.4 28.7 36.5 45.2 54.3
Balance sheet
Cash & equivalents 2,940 3,456 4,583 6,751 7,334 9,853 6,831 8,153 7,546 9,737 12,386
Debtors 363 418 412 532 514 667 854 708 809 916 1,042
Other current assets 935 792 1,235 853 1,079 931 1,066 869 917 968 1,029
Current assets 4,237 4,666 6,230 8,136 8,927 11,451 8,751 9,730 9,273 11,622 14,457
Fixed assets (incl. goodwill) 1,697 1,699 2,204 2,121 2,900 3,086 11,797 11,094 10,876 10,569 10,175
Other non-current assets 318 536 755 648 1,917 2,076 2,984 3,031 3,031 3,031 3,031
Total assets 6,252 6,901 9,189 10,905 13,744 16,613 23,532 23,855 23,180 25,222 27,663
Short-term loans — — — — — — 1,789 1,533 — — —
Creditors and other liabilities 915 848 1,012 1,089 2,274 2,743 3,211 3,165 3,388 3,624 3,902
Current liabilities 915 848 1,012 1,089 2,274 2,743 5,000 4,698 3,388 3,624 3,902
Secured loans — — — — — 1 1,668 833 — — —
Other liabilities (incl. deferred) 242 73 228 306 930 1,109 1,429 1,329 1,329 1,329 1,329
Total liabilities 1,157 921 1,240 1,395 3,204 3,853 8,097 6,860 4,717 4,953 5,231
Equity 5,095 5,980 7,949 9,510 10,540 12,760 15,435 16,995 18,462 20,269 22,432
Total equity and liabilities 6,252 6,901 9,189 10,905 13,744 16,613 23,532 23,855 23,180 25,222 27,663
Cash flow
CFO pre-WC changes 2,087 2,504 2,816 3,135 3,652 4,632 5,934 5,270 4,700 5,671 6,736
Working capital 69 (81) 95 93 122 367 (167) 355 74 78 92
Tax (687) (706) (940) (1,043) (935) (1,017) (1,300) (1,065) (1,059) (1,307) (1,568)
Cash flow from operations 1,469 1,716 1,971 2,185 2,839 3,982 4,467 4,560 3,715 4,441 5,259
Capex (including acquisitions) (441) (516) (625) (420) (1,060) (627) (941) (365) (800) (800) (800)
Free cash flow 1,027 1,200 1,346 1,765 1,779 3,355 3,526 4,195 2,915 3,641 4,459
Key ratios (%)
Sales growth (%) 20.0 15.3 15.8 13.9 10.6 18.9 32.0 (3.4) 14.3 13.2 13.8
Gross margin (%) 78.1 78.4 78.6 78.2 77.5 74.9 75.9 77.8 77.0 77.1 77.2
EBITDA margin (%) 26.5 25.9 25.0 24.4 25.8 27.6 26.9 24.3 24.7 25.3 25.6
RoAE (%) 31.1 27.8 24.5 22.8 22.5 25.0 24.5 15.0 17.2 19.4 21.2
RoACE (post-tax, ex-cash) (%) 64.6 59.2 51.6 55.6 66.6 88.3 44.6 20.9 27.2 33.7 41.8
Net debt to equity (X) (0.6) (0.6) (0.6) (0.7) (0.7) (0.8) (0.2) (0.3) (0.4) (0.5) (0.6)

Source: Company, Kotak Institutional Equities estimates

Dr Lal Pathlabs
Health Care Services India Research
 DISCLAIMERS, DISCLOSURES & LEGAL
Ratings and other definitions/identifiers
Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our Fair Value estimates are also on a 12-month horizon basis.

Our Ratings System does not take into account short-term volatility in stock prices related to movements in the market. Hence, a particular Rating may
not strictly be in accordance with the Rating System at all times.

Distribution of ratings/investment banking relationships

Kotak Institutional Equities Research coverage universe

Percentage of companies covered by Kotak Institutional

70%
Equities, within the specified category.

60%
Percentage of companies within each category for which
Kotak Institutional Equities and or its affiliates has
50%
provided investment banking services within the previous
12 months.
40% * The above categories are defined as follows: Buy = We
33.2% expect this stock to deliver more than 15% returns over
29.7%
30% the next 12 months; Add = We expect this stock to deliver
5-15% returns over the next 12 months; Reduce = We
19.0% 18.1% expect this stock to deliver -5-+5% returns over the next
20% 12 months; Sell = We expect this stock to deliver less than
-5% returns over the next 12 months. Our target prices
10% are also on a 12-month horizon basis. These ratings are
4.7% 4.7%
used illustratively to comply with applicable regulations. As
0.4% 0.4%
of 31/03/2023 Kotak Institutional Equities Investment
0%
Research had investment ratings on 232 equity securities.
BUY ADD REDUCE SELL

Source: Kotak Institutional Equities

As of March 31, 2023

Coverage view
The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and fair value, if any, have been suspended temporarily. Such suspension is in compliance with applicable
regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or
strategic transaction involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and fair value, if any, for this stock, because there is not a
sufficient fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, if any, are no longer in
effect for this stock and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

India Research
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