Dr. Lal PathLabs IPO Reviews by various Research Analysts is as summarized below,
Motilal Oswal Securities Analyst Kumar Saurabh wrote,
Dr Lal will be the only pure play listed diagnostic business in India. At higher end of the price band, the company would trade at EV/ EBITDA of 27x FY15 and 24x 1HFY16. The valuation multiples are in line with the recent Metropolis transaction (~@27x trailing EV/ EBITDA). Premium valuations is on account of superior margins (>300bps more than SRL in FY15), strong brand franchise, robust growth, net cash balance sheet and cash flow generation.
IIFL Analysts Kushal Rughani and Bhavesh Gandhi wrote,
Dr Lal PathLabs (DLP) runs diagnostic laboratories chain of 172 pathology labs and 1,554 patience service centers across India. North India accounted for 73% of H1 FY16 revenues and DLP has posted robust revenue and PAT cagr of 21% and 30% respectively over FY13‐15 and we expect the momentum to continue with ~19% and 21% cagr respectively over FY15‐ 18E. At the upper price band of Rs550, the stock is priced at ~27x FY18E EPS. We like the underlying business contours: strong brand franchisee, robust balance sheet and healthy free cash flows combined with RoE/RoCE of ~30‐ 40%. We believe premium valuations are justified given the accompanying business fundamentals. Recommend investors to Subscribe at the upper price band.
Reliance Securities analyst Sapna Jhawar Wrote,
Further, while there has been an increase in evidence based treatments, lack of comprehensive and stringent framework exposes the vulnerability of large chains in this business. At the lower end of the price band, the company is valued at 46.6x FY15 PE, which is expensive given the highly fragmented market and low entry barriers in the sector. Though we like the fundamentals and remain confident of its immense business potential, we suggest investing at lower levels.
Ajcon Global Analyst Akash Jain wrote,
At the upper end of the price band of Rs. 550, the issue is richly valued at a P/E of 48x on post issue FY15 EPS. With due consideration to factors like a) DLPL well positioned in one of the fastest – growing segments of the Indian Helathcare Industry, b) established consumer healthcare brand in diagnostic services, c) leader in largely fragmented and unorganized industry, c) brand recognition for quality diagnostic services, d) attractive operating metrics and multiple levers in place to drive next phase of growth, e) debt – free Company, f) robust past financial performance, g) consistent Free Cash Flow generation over last five years and sustainable - strong Return on Equity, we believe premium valuations are justified and recommend long term investors to “SUBSCRIBE” the issue .
GEL Capital has the following View,
The industry is poised to grow in favour of the organized sector with rising requirement for high end testing & consolidation in industry. Dr Lal PathLabs will be the only pure play listed diagnostic business in India. At higher end of the price band, the company trade at 47.4x its FY15 EPS of Rs11.6. However, strong balance sheet with net cash of Rs2.35bn at H1FY16end and free cash flow generation of Rs700m will help the company to fund future growth. We recommend "SUBSCRIBE" to this IPO for longer run horizon.
IndiaNivesh Analyst Daljeet Kohli & Tushar Manudhane Wrote,
Considering past deal of Metropolis in private space, which was ~4.2x trailing EV/sales and LALP being the only company in listed space for diagnostic services, we believe that valuation are comfortable. Thus, on back of better growth prospects, enough cash for inorganic growth and comfortable valuation, we recommend SUBSCRIBE on the issue
ICICI Direct Analysts Siddhant Khandekar, Mitesh Shah and Nandan Kamat said,
We believe DLPL, with its pan-India presence and reputation for providing quality diagnostic healthcare services, is well positioned to take advantage of the growth of the Indian diagnostic healthcare services industry. At the IPO price band of | 540-550, the stock is available at 46-47x on FY15 EPS of | 11.7. We recommend that investors SUBSCRIBE to the issue.
Way2Wealth has the following Review,
The industry is poised to grow in favour of the organized sector with rising requirement for high end testing and consolidation in industry. We believe the team expertise along with its long term experience in this field will enable the company to gain growth opportunities arising out of this phase. We believe that the long-term prospects for the company are good. However the IPO is demanding valuations which seem bit stretched. The company is trading at 48x times FY15 with EPS of Rs11.48/-. We advise investors with a long-term investment horizon to SUBSCRIBE to the issue.
Angel Broking has the following Review,
However, though we believe that the company can sustain the profitability trend and is fundamentally strong, we believe that the valuations demanded through the IPO factor in the company’s business fundamentals as well as the scarcity premium with it being the only listed company in the space. Hence, we recommend an “Avoid” on the issue. Investors could consider waiting for a possible correction in the stock price post the listing of the IPO.
Spark Capital has the Following note,
We estimate an earnings CAGR of 27% for DLPL in FY15-18E. At the mid-point of the proposed IPO price band, the stock is valued at 31x and 24x our FY17E and FY18E earnings, respectively. The valuation is broadly in-line with DLPL’s Asian healthcare services peers (refer slide 10 for details), despite superior capital efficiency, free cash generation and balance sheet strength. We believe the IPO offers a unique opportunity to invest into a high-quality player in an attractive industry at reasonable valuations and recommend investors to SUBSCRIBE to the issue
SPA Securities has the following Recommendation for investors
We are positive on Indian healthcare sector given India's per capita expenditure on healthcare service was USD 215 in FY14 (~4.0% of India's GDP), which is way lower even against developing countries like Brazil (~USD 1454), clearly reflecting the growth potential. DLPL is well poised to capture this opportunity given it has second largest diagnostic chain in India, attractive operating metrics and strong cash flow generation to fund expansion. At the upper end of the price band the stocks is valued at 30.3x FY17E earning (assuming 25% CAGR) which seems fully valued but as the company has an asset light model coupled with high return ratios, high growth rates and a strong brand image we recommend to subscribe to the issue as a good long term investment.
