‘Align’ing with a brighter future
Laxmi Dental is India’s only fully-integrated dental products company offering customised crowns, bridges, aligner solutions and paediatric products. It is the second-largest domestic lab (68% of revenue) with a 22,000-plus dental network and is the largest exports lab in India.
India has a high oral disease burden, but remains an underpenetrated and fragmented dental care market with organised market share in a mere single digit. We believe Laxmi is poised to capture a meaningful share of the pie given its wide portfolio and scale aided by tailwinds such as preference for aesthetics, digitalisation and rising income. We forecast a revenue/adjusted PAT CAGR of ~26%/59% with RoCE rising from 19% to ~29% over FY25E–28E. Initiate at ‘BUY’ with TP of INR570.
End-to-end integrated dynamo in underserved yet growing market
Given the widest range of product offerings supported by a 22,000-plus strong dental network, Laxmi is the go-to play to ride the wave in the highly underpenetrated and fragmented but fast-growing dental care market. Laxmi is ~5x larger than the third-largest player in the domestic market; despite this, it has barely scratched the surface in terms of market share.
Shift to metal-free products, digitalisation catalysts for lab business
Metal-free crowns are gaining acceptance for their durability and aesthetic appeal, and Laxmi is capitalising on this shift with its branded high-margin ‘Illusion Zirconia’. The industry is also moving from physical impressions to digital, with Laxmi’s ‘iScan Pro’ scanner capturing this shift (digital units contribution rose from 28% in FY22 to 62% in H1FY25), yielding faster turnarounds along with reduced logistics and rework costs. In addition, Laxmi is directly targeting DSOs in US, which should also accelerate exports growth. As a result, we reckon Laxmi’s lab business revenues shall grow at a ~20% CAGR, with margin expanding ~925bp over FY25E–28E to ~22% (gross basis).
Aligners: Nascent but thriving segment; Kids-e-Dental a pioneer
The aligners segment, which is reporting rapid adoption, is likely to expand at a ~39% CAGR over FY25E–28E backed by sector tailwinds such as focus on aesthetics, rising incomes, 510(k) clearance and a sustainable B2B2C model with ‘pay-as-you-go’. Kidse-Dental is also a vital growth pillar for Laxmi, being the sole Indian brand offering exclusive paediatric products. Given its plans to expand its global footprint and with registrations underway, Kids-e-Dental sales shall more than double over FY24–28E.
Smiles ahead; initiate at ‘BUY’ with TP of INR570
With the balance sheet turning healthy and capex plans provided for (recent fund raising via IPO), Laxmi is well-positioned to benefit from sector tailwinds. Initiate at ‘BUY/SO’ with a TP of INR570, valuing the stock at 40x FY27E EPS (25% discount to Poly Medicure and Chinese Angelalign due to Laxmi’s scale and limited track record), implying 0.6x PEG ratio. Our DCF valuation yields a similar TP based on ~14% WACC, 5% terminal growth and revenue CAGR (FY25E–30E: 25%; FY31E–40E: 15%). Key risks: slow ramp-up in aligners, geographic concentration and pending CBI case.
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