Key highlights from Dr Lal PathLabs Ltd (LALPATHLAB) Q4 FY23 Earnings Concall
Q&A Highlights:
- [00:17:48] Rahul Agarwal from InCred Capital asked if 13-14% revenue growth can be seen next year, given the supportive base, low employee attrition, and faster growth outside Delhi NCR. Om Prakash MD said FY ’23 was challenging due to attrition, COVID, and other headwinds. However, LALPATH is entering FY24 in a stronger position, with lower attrition, fixed-price increases, and COVID pressures easing. LALPATHLAB expects growth in FY24.
- [00:22:31] Prakash Kapadia at Anived Portfolio enquired how has the competitive landscape changed in the industry due to price hikes by new age players. Bharath Uppiliappan CEO said the industry is competitive and innovative. Incumbents and new players compete, but some new players are scaling back on deep discounts as patients realize they may not be worth it. The industry is in a transitionary phase.
- [00:23:10] Prakash Kapadia at Anived Portfolio asked about the impact of price hikes on revenues in FY24, if it will be in specialty, packages, or specific geographies. Bharath Uppiliappan CEO said the company has not raised prices on routine tests or packages. LALPATH has raised prices on high-end tests, which will have a 1.7% impact on revenue this quarter and a 2.5% impact going forward.
- [00:23:29] Prakash Kapadia at Anived Portfolio asked about the key drivers for organic growth in FY24 and beyond. Bharath Uppiliappan CEO replied that LALPATH plans to grow its business by expanding into Tier-3 and Tier-4 cities, strengthening its presence in metro cities, and differentiating its channel management programs. LALPATH will also focus on high-end testing, such as genomic testing and Centers of Excellence, and on improving tech stack to provide a better patient experience.
- [00:30:01] Bino Pathiparampil at Elara Capital asked about the plans for addition of labs for FY24 and FY25. Bharath Uppiliappan CEO replied that the company will continue to expand its lab network by opening 10-15 new labs in Tier-3 and Tier-4 cities in the North-East, South, and West.
- [00:30:37] Lavanya from UBS enquired about the margins for suburban in 4Q23 as last quarter there was a meaningful hit. Bharath Uppiliappan CEO replied that normalized EBITDA margins for suburban for 4Q23 is about 11.2% and for full year it is 12%.
- [00:33:45] Prakash Agarwal from Axis Capital asked how has the price increase for specialized tests affected LALPATH business. Bharath Uppiliappan CEO replied that the price increase for specialized tests has gone relatively well. The compa also did not raise prices on routine tests or packages. We expect that other companies will also raise prices in the coming months, due to inflation and the lowering of COVID volumes.
- [00:36:01] Prakash Agarwal from Axis Capital enquired how has the competitive environment in the B2B segment changed, and how is LALPATH performing in the South. Bharath Uppiliappan CEO said the B2B segment is as competitive as ever, but the company has put in place multiple programs to manage it effectively. B2B is LALPATH’s fastest-growing channels today, and is pleased with the progress of its channel management program. LALPATH is also continuing to grow its business in the South at a faster rate than the company as a whole.
- [00:39:09] Nitin Agarwal with DAM Capital asked that despite the growing business, how there has been a reduction in employee costs and other expenses. Bharath Uppiliappan CEO said the use of technology has helped the company automate its processes and reduce headcount.
- [00:45:52] Cyndrella Carvalho from JM Financial asked that Mumbai lab has been a good source of patient growth in the past, so how do will it continue to contribute to overall patient growth in future. Shankha Banerjee CEO replied that the Mumbai lab was launched in Jan. and is expected to take longer to reach its full potential than LALPATH’s other reference labs. This is because it is targeting a new customer base and a new vertical. However, the company expects it to have a positive impact on patient growth in the coming quarters.
- [00:47:35] Cyndrella Carvalho from JM Financial asked if LALPATH’s cost base will support its growth and operating leverage in FY24 and FY25. Ved Prakash Goel Group CFO said that the new reference lab will give the company a competitive advantage and that its existing infrastructure can be leveraged to improve margins.
- [00:49:03] Tanmay Gandhi of Investec asked why was the sequential growth flat in 4Q23, when it has historically been between 3% and 5%. Om Prakash MD said sequential growth has been flat in 4Q for the past two years. It’s attributed to factors like evening out of infection rates and the increase in screening packages due to air pollution. LALPATH is hopeful that FY24 will be different, as COVID will no longer be a variable.