On Tuesday, UBS expressed a positive outlook on Dr Lal PathLabs Ltd (DLPL:IN), with a revised price target of INR3,500, up from INR2,900, while retaining a Buy rating on the stock. The firm's stance is based on the anticipation of dissipating market concerns regarding patient volume growth, which has been negative in the past fiscal year.
The analysis from UBS suggests that Dr Lal PathLabs is poised to achieve a 6-7% increase in patient growth, coupled with a 4-5% improvement in tests per patient in the fiscal year 2025 and beyond. This growth is expected to be supported by an accelerated expansion of labs and centers, particularly in tier 3 and higher cities, where the company is gaining market share and has potential for further penetration.
UBS also notes that Dr Lal PathLabs is experiencing an uptick in profitability, which is enabling the company to reinvest in growth initiatives. These include increased marketing expenditures that bolster home collection services. The firm believes that these strategies will sustain the growth trajectory of Dr Lal PathLabs as the company continues to enhance its new labs and centers.
In a previous note from March 2024, UBS had already underscored Dr. Lal's strong market position. Since then, consensus estimates for the company's fiscal year 2025 and 2026 earnings have been raised by 2% and 3% respectively. However, UBS anticipates that there is still potential for further upward revisions in earnings forecasts.
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