Dr Lal Path Labs Q1FY18 Concall Summary

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    Financial Highlights

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    • Q1FY18 revenues improved 12% to Rs. 2,493 million with 9.1%growth in volumes and 2.5% through price and mix(1.5 % tests and 1 % through price)
    • Normalized EBITDA, after eliminating the impact ofRSU and ESOPs and other stock-based remuneration charges, stood at Rs.680 million in Q1 FY18.
    • EBITDA margins in Q1 were at 27.3%.Consequently, Q1 FY18 PBT growth was at 9.2%.
    • The PAT increased by 11.7%. to Rs. 446 million
    • Revenues from Delhi NCR region increased by 10.9%
    • Roughly 60% of business is B2C and balance is B2B
    • The expenses related to Kolkata reference lab will have some dilutive impact on margins in the shortto medium term beginning from Q4 onwards
    • It would take around Rs 50 to 60 crore of business to breakeventhe expenses of Kolkata lab , it would take maximum of two years
    • 1% or 8 crore to 10 crore operational cost impact on margins post Kolkata lab getting operationalized with sales being static
    • The increase in costs from 1% to 1.5 % due to impact of input GST
    • Sudden break of vector borne disease accounts for 10-15 crore of revenue
    • CAPEX this year should be around 60 crore
    • Pricing pressure still persists in B2B segment
    • Hospital Lab Management(HLM)business contributes to 4% of DLPL business and has lower EBIDTA margin
    • Hospital Lab Management(HLM)business also increses network which gives opportunity to enter into new markets
    • The new business acquired in Bangladesh is loss making but expecting it to be profitable in future
    • 70 % stake in the Bangladeshi company 

     Operational highlights

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    • Utilized the hub-and-spoke model to increase the reach via PSCs which enabled DLPL to reach out to a wider patientbase of 3.59 million
    • Focus is on increasing collection center to service PUPs as they are operating on low threshold
    • Optimized costs and increased productivity contributed to high EBITDA
    • Volume growth is up by 9%, test growth is up by 10.9%

    Industry overview

    • Lack of full service players in market who provides wellness as well as prescriptive service
    • DLPL in inline or slightly higher than industry growth
    • The industry growth seems to be slowing down to 15 %-16 % from 20 % earlier
    • Next two quarters will give better idea about industry growth
    • Most of the competition in B2B segment is from bigger players

     Future Prospects

    • Steadily progressing towards under-represented geography such as eastern region with Kolkata reference lab within timeline of inauguration
    • Using focused city approach to expand in south and west region,building brand presence
    • Acquiring local diagnostic center in Bangladesh to increase presence in the region
    • Postpone new reference lab in Lucknow which was scheduled in Fy’19
    • Cautiously increasing number of labs by applying strong filter based on locations
    • To deal with competitive pricing pressures in B2B segment DLPL is focusing on optimizing operational cost, improve productivity and quality

     

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