IPO Notes Dr. Lal PathLabs: Subscribe (IIFL)

Dr. Lal PathLabs: Subscribe
Issue opens 08-Dec-15, Issue closes 10-Dec-15, Price band Rs540-550

Dr Lal PathLabs (DLP) runs diagnostic laboratories chain of 172 pathology labs and 1,554 patience service centers across India. North India accounted for 73% of H1 FY16 revenues and DLP has posted robust revenue and PAT cagr of 21% and 30% respectively over FY13-15 and we expect the momentum to continue with ~19% and 21% cagr respectively over FY15-18E. At the upper price band of Rs550, the stock is priced at ~27x FY18E EPS. We like the underlying business contours: strong brand franchisee, robust balance sheet and healthy free cash flows combined with RoE/RoCE of ~30-40%. We believe premium valuations are justified given the accompanying business fundamentals. Recommend investors to Subscribe at the upper price band.