Dr Lal PathLabs Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Dr Lal PathLabs Ltd (LALPATHLAB) Q1 FY23 Earnings Concall

Management Update:

• LALPATHLAB said it clocked the highest quarterly non-COVID revenue of INR482 crore, a growth of 25% YoYs. Additionally, COVID revenue significantly declined by 91% from INR221 crore to INR21 crore in 1Q23.

Q&A Highlights:

• Pooja Bhatia from Morgan Stanley asked if the company is holding on to FY23 guidance of mid-teen revenue growth given in 4Q22 and the volume/value split. Om Prakash MD replied that the company’s best estimate is to maintain that, but it’s difficult right now to put a number. LALPATHLAB is confident of having a pre-COVID growth rate of 13-15% in non-COVID category.

• Pooja Bhatia with Morgan Stanley also enquired that on the M&A front, what assets interest the company. Om Prakash MD replied that there is nothing to share right now. But the team is focused on making the suburban asset integrate and work well. But right now, the company will have a wait and watch strategy.

• Pooja Bhatia from Morgan Stanley asked about the roadmap to improve margins in suburban from 12% to 30%. Om Prakash MD replied that it believes if the company focus on topline aggressively in suburban, it should be able to improve margins as the business is concentrated in Mumbai and potential is high.

• Sriraam Rathi of BNP Paribas enquired how much of revenue is coming from franchises. Bharath Uppiliappan CEO answered that 40% plus is franchisee business. But there has not been a sharp increase in fees to collection centers, it has been as per normal trends. Also, the contribution of a franchisee business to the total business is on the rise.

• Sriraam Rathi of BNP Paribas asked about other expenses being higher in 1Q23 and if the company expects the INR105 crore run rate to continue. Ved Prakash CFO replied that comparing 4Q22 to 1Q23, there are investments the company has made on IT digital side and the other is on marketing.

• Shyam Srinivasan from Goldman Sachs asked about non-COVID sales, the split between volume and price. Bharath Uppiliappan CEO said volume growth is about 12.5%, 13% give or take and rest is mix impact on pricing. So a price impact of 2% odd. It is not a price increase, but a mix impact.

• Prakash Kapadia from Anived Portfolio asked how the company is managing attrition if any due to increased competition. Bharath Uppiliappan CEO answered that on attrition there is nothing substantial. Front line attrition remains at previous rate.