With the rise in the number of reported novel coronavirus (COVID-19) disease cases in India, the government on 18th March 2020, allowed private diagnostic labs to start testing for coronavirus samples. This could have a positive impact on the price of diagnostic stocks.

The nationwide lockdown in the wake of coronavirus outbreak will lead to sharp decline in walk-ins and thereby will impact the revenue of the companies. We believe that the Covid-19 testing will offset some of the revenue loss.

Many of the diagnostic service providers have started conducting coronavirus tests. The ICMR guidelines recommended that the maximum cost for testing sample should not exceed Rs. 4,500.

Over the last few years, stocks of diagnostic players have done well as consumers are getting more aware on health which has led to increase in preventive check-ups.  With the fast-spreading coronavirus pandemic, we believe that the sector stands to gain. Key stocks in the space includes Dr Lal Pathlabs, Metropolis Healthcare, Thyrocare Technologies, SRL Diagnostics (Fortis Healthcare).

Listed Diagnostic Stocks

[1] Dr. Lal Pathlab Limited – The Company provides diagnostic and related healthcare tests and services through a network of has 200 clinical laboratories (including National Reference Lab at Delhi & Regional Reference Lab at Kolkata), 2,569 Patient Service Centers (PSCs) and 6,426 Pick-up Points (PUPs). The Company collected and processed ~36.5 million samples from ~15.0 million patients in 9M FY20 as compared to ~41.8 million samples from ~17.6 million patients in FY19.

Particulars FY15 FY16 FY17 FY18 FY19
Revenue (In Rs. Cr.) 659.59 791.32 912.38 1,056.92 1,203.42
Growth 19.97% 15.30% 15.84% 13.86%
EBITDA (In Rs. Cr.) 155.95 209.72 237.52 264.00 293.66
EBITDA Margin 23.64% 26.50% 26.03% 24.98% 24.40%
EBIT (In Rs. Cr.) 127.76 181.44 209.98 230.94 255.44
EBIT Margin 19.37% 22.93% 23.01% 21.85% 21.23%
PBT (In Rs. Cr.) 139.72 200.72 236.82 261.32 300.55
PAT (In Rs. Cr.) 95.68 132.19 154.59 170.73 199.18
PAT Margin 14.51% 16.70% 16.94% 16.15% 16.55%
EPS (In Rs.) 11.48 15.86 18.55 20.49 23.90
EPS Growth Rate 38.16% 16.95% 10.44% 16.66%

[2] Metropolis Healthcare – The Company provides diagnostic services through a network of 125 clinical laboratories and 2781 patient service centres. The Company conducted approximately 17.0 million tests from approximately 8.9 million patient visits in 2019. B2C segment now contributes 55% of the revenue from Focus cities as compared to 52% in 9MFY19.

Particulars FY15 FY16 FY17 FY18 FY19
Revenue (In Rs. Cr.) 455.50 475.47 544.72 643.57 761.18
Growth 4.38% 14.56% 18.15% 18.27%
EBITDA (In Rs. Cr.) 118.10 126.49 151.95 172.55 200.37
EBITDA Margin 25.93% 26.60% 27.90% 26.81% 26.32%
EBIT (In Rs. Cr.) 97.58 109.85 134.72 153.53 180.30
EBIT Margin 21.42% 23.10% 24.73% 23.86% 23.69%
PBT (In Rs. Cr.) 101.07 124.21 157.27 160.30 187.98
PAT (In Rs. Cr.) 60.98 76.80 101.66 102.27 120.15
PAT Margin 13.39% 16.15% 18.66% 15.89% 15.78%
EPS (In Rs.) 12.15 15.31 20.26 20.38 23.94
EPS Growth Rate 25.94% 32.37% 0.60% 17.48%

[3] Thyrocare Technologies Limited – The Company is India’s first fully automated diagnostic laboratory. Thyrocare operates with a Centralized Processing Laboratory (CPL) in Mumbai – India for esoteric tests; and 9 Regional Processing Laboratory in New Delhi, Bhopal, Kolkata, Hyderabad, Coimbatore, Bengaluru, Patna, Mumbai and Chennai. The Company’s fully-owned subsidiary, Nueclear Healthcare undertakes cancer-related diagnostic testing. It has a total of 12 centres (6 owned and 6 franchised). In FY 2019, the Company processed 18.76 million samples.

Particulars FY15 FY16 FY17 FY18 FY19
Revenue (In Rs. Cr.) 182.96 240.97 304.39 356.32 402.91
Growth 31.71% 26.32% 17.06% 13.08%
EBITDA (In Rs. Cr.) 72.38 93.50 115.19 144.74 154.23
EBITDA Margin 39.56% 38.80% 37.84% 40.62% 38.28%
EBIT (In Rs. Cr.) 59.51 75.26 97.14 124.64 128.06
EBIT Margin 32.53% 31.23% 31.91% 34.98% 31.78%
PBT (In Rs. Cr.) 67.62 81.80 81.67 144.99 137.40
PAT (In Rs. Cr.) 45.22 51.80 42.85 93.28 85.14
PAT Margin 24.72% 21.50% 14.08% 26.18% 21.13%
EPS (In Rs.) 8.42 9.64 7.98 17.36 16.11
EPS Growth Rate 14.55% -17.28% 117.69% -7.19%

[4] SRL Diagnostics – The Company offers diagnostics services through a network of 397 networking laboratories including 4 reference labs, 4 centres of excellence, 24 radiology/imaging centres, 44 labs accredited by NABL & CAP and 24 wellness centers. The Company collected and processed ~30 million samples from ~15.0 million patients in FY19.

Not Directly Listed. DIAGNOSTIC BUSINESS CONTRIBUTES APPROX. 20% TO OVERALL REVENUES AND EBITDA OF FORTIS HEALTHCARE.

We believe that out of the listed diagnostic player, Dr. Lal Pathlab is better placed among them because of the higher brand presence and the expertise.