Dr Lal PathLabs a well recognised brand in the Diagnostic Sector

I have stopped following Lal path labs for a while and looks the stock price has gone down significantly. Overall numbers of December where not that great but it was quite obvious citing the competitors entering and trying to disrupt the market.

Reliance entering the space will surely be other pain area as there deep pockets will be causing disruptions and then power of advertising in all there platforms. Also diagnostic is not a completely cash buring business as people who go for a test will surely pay money and Reliance can place the test at competing prices. One contrary, presence of testing centers as Reliance will have to build those and then partner with doctors. I have seen a few private hospitals which are sending there tests to Dr Lal exclusively for almost all patients in tier 3 city. So Reliance will need ground work which will take time and is not easy as distributing sim cards. Still they have money to endure that and whole celeb to advertise it.

Funny how commentary of management changes with market dynamics in matter of months. Overall in current scenario with new entrant I feel growth will be difficult for at least a 4-5 quarters unless management finds a way

Positives of Lal pathlab

1. Margins are intact and cash is there in balance sheet.
2. Some of the new markets like south can be leveraged with great execution to get the growth back
3. Diagnostic space is big and will get bigger with time.

That said the current valuation seems high. I had added up Lal path lab during highs and it didn’t prove out to be a good decision overall from portfolio perspective. All pharma stocks have beaten up and overall market sentiments are not helping either.

I still see a good potential of growth in south markets but valuations are still tricky here. Funny with almost 50% drop in prices and PE is still 63.

Overall the era of cheap money seems to be over and high PE stocks will surely get beaten causing long term pain for retail investors. Dr Lal, Laraus and Divi’s are prime examples where growth went out of the window in matter of quarter and markets didn’t like it.

Disclaimer: Invested