Dr. Lal PathLabs Ltd Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : I have three questions. Firstly, Om, on Tier 3, Tier 4 markets, either expanding infra, just wanted to know any learning from patient behavior here? Like how are these patients different from metros and Tier 1? What are they seeking for from a brand like yours?

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : Is the pricing very different or even that remains the same?

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : Got it. Secondly, on the Medical Center of Excellence just wanted to know could you elaborate what is this exactly? Like, are we putting up a different infrastructure here? Or is this the current lab is getting transformed into something (multiple speakers)--?

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : Right. So these are like listing people working at different labs, which are identified as -- where you want to increase communication and you want to focus on specific specialty. Is that correct?

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : Okay, cool. And lastly, on the Swasthfit specialized portfolio, just wanted to know -- I know that it's not right now, but what scale or total mix into overall Swasthfit do you visualize over the next three years?

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : Yeah, Swasthfit specialized portfolio. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 12:00PM, DLPA.NS - Q1 2025 Dr. Lal PathLabs Ltd Earnings Call

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : Shankha, I understand. What I was asking was more like a three-year view? Would you visualize like what kind of a specialized mix would you have within Swasthfit? Would you have that?

Question: Rahul Agarwal - IKIGAI Asset Manager Holdings Pvt. Ltd. - Analyst : All right. I'll take it more offline. Thank you so much for answering my question. Best wishes. I'll fall back in the queue.

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Yeah, thank you for the opportunity, sir. I have three questions.

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Okay. Is this any better?

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Okay, great. Sir, I have three sets of questions. The first one is if we were to look at our volume growth, let's say, of about 9% or so, could you give us some sort of perspective on geography wise how that is faring? I mean, which are like the geographies driving double digit and which are the ones which are still lagging?

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Okay. Got it. My second question, sir, is what would be the like-for-like price increase that we have taken on a year-on-year basis across tests?

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Got it. Which means if I were to look at, let's say, the realization per test, which is probably up 2% year on year, that's probably driven more by mix, right? Rather than anything else on a like-for-like (multiple speakers)--

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Okay, Great. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 12:00PM, DLPA.NS - Q1 2025 Dr. Lal PathLabs Ltd Earnings Call

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Sorry, sir. I just missed the last part.

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Okay, got it. And last question, sir, would you be able to share the revenue and EBITDA margin for suburban this quarter?

Question: Karthik Chellappa - Indus Capital Advisors (HK) Ltd - Analyst : Okay. 8% revenue growth and 14% EBITDA margin. Okay. Got it. Thank you, sir. Thank you very much, and wish you all the very best for the remaining quarters.

Question: Binay Singh - Morgan Stanley - Analyst : The 8% growth in suburban you commented as YoY growth, so basically would have done around INR40 crore or so of revenue. Is that YoY number that you gave?

Question: Binay Singh - Morgan Stanley - Analyst : Even for suburban growth to be lower than your overall growth because or is it any comments on that?

Question: Binay Singh - Morgan Stanley - Analyst : Right. And sir, secondly, on your own margin, could you talk a little bit about -- because in the past, we've always seen that quarter two is usually the strongest quarter for the company. And given revenue leverage that falls in, so margins also tend to be the highest in quarter two. Would you expect a similar trajectory into this year also?

Question: Binay Singh - Morgan Stanley - Analyst : Right. So in the sense, margins are -- could at least hold up or inch up on an annualized basis from these levels as you are getting leverage again, like it's visible in your Tier 3 (multiple speakers)--

Question: Binay Singh - Morgan Stanley - Analyst : And sir, lastly, just on competition, like after many calls, you've not made much comment on competition in this time around in the call. Is that because you see it easing or there was not much to add. That's why it was not there in the opening remarks.

Question: Prakash Kapadia - Spark PWM Private Limited - Analyst : Could you give us some sense of specialized test as percentage of overall revenues maybe last year end? Do we see that as a differentiator going forward because we seem to be investing in R&D. We seem to be doing a lot of work on newer tests. So where are we in our journey? That is my first question. And secondly, on suburban, what -- will it take to get that inflection point? Because it's almost now three years and we've been investing in process. We've built the infra. We've transitioned from being a doctor advocacy to a consumer brand. And I think we are still number three in Bombay. So what will it take for us to grow suburban and faster than company average? Those are my two questions.

Question: Prakash Kapadia - Spark PWM Private Limited - Analyst : Okay. And that would be Shankha from Bombay only or this Pune or Goa initiative will get us there.

Question: Kunal Randeria - Axis Capital - Analyst : My first questions is around (technical difficulty)--

Question: Kunal Randeria - Axis Capital - Analyst : Sure. I hope this is better?

Question: Sumit Gupta - Centrum India - Analyst : Yeah, some question of Swasthfit. So I just want to understand what is driving Swasthfit? Overall so if you see the -- overall contribution has been increasing on a sequential basis also? And can you explain how much is coming from rural and urban?

Question: Sumit Gupta - Centrum India - Analyst : Okay, sir. So sir, over like -- to take a broader view over the next three to four years, what is the peak contribution that you -- like if you expect the Swasthfit to contribute overall revenue?

Question: Sumit Gupta - Centrum India - Analyst : Okay, sir. One more question on your margins. So how do you see the margins inching up, pairing well due to be it Swasthfit or overall business.

Question: Sumit Gupta - Centrum India - Analyst : Hello. Yes, sir. So overall like over the next three to four years.

Question: Sumit Gupta - Centrum India - Analyst : Okay, sir. So just one last question. What was the revenue contribution from north and west? The overall geography mxi for this quarter?

Question: Adrit Chaturvedi - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : I would just like to follow up on the awareness campaign that you had mentioned earlier. So in these awareness campaigns are there also any discounts that you're offering to drive up a lot of these bundled testing volumes?

Question: Adrit Chaturvedi - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay. So would you have the number handy at you, if you could give like at MRP, if there are any increases in these bundle testing? Because right now they're discounted. So there's no true sense of volume that we could gauge. Is there something like a GMV number on that?

Question: Adrit Chaturvedi - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay. Okay. Thank you. And also, I think a lot of these bundle testing are also driving up your test per patient, right? So right now it's at 2.9 -- like as the share of this increases, do you have like a sense of where -- how up that could go? Like this across 3 or like a 3.1? Or is there a vision there that you would like to have both tests per patient or an average number that you have?

Question: Adrit Chaturvedi - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay. Got it. And just finally from me. So this specialized portfolio now, now that it's like 23%. What gross margins are you seeing on that? And I presume that there will be a bit -- on the lower end of the whole portfolio.

Question: Adrit Chaturvedi - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Could you qualitatively or like can we -- how different could they be? Like an average specialized versus a routine check? What kind of gross margin differentials are you observing?

Question: Adrit Chaturvedi - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay. Do you have like a mix of the institutional business through Swasthfit that you're doing versus your retail?

Question: Kunal Randeria - Axis Capital - Analyst : Hi, good evening. Sorry, I got disconnected earlier. So apologies if my question has been asked. Sir, you have been expanding aggressively in Tier 3, Tier 4 cities. So is this worth -- contribution from there also (technical difficulty)--

Question: Kunal Randeria - Axis Capital - Analyst : From Tier 3 and Tier 4? So a company level average of Swasthfit is around 25%. So even from Tier 3 or 4, is it similar or would it be substantially lower?

Question: Kunal Randeria - Axis Capital - Analyst : Got it. Okay. And second question is actually for Ved. Ved, you have mentioned the 27% is the kind of EBITDA margin you're comfortable guiding with. You're already at 27%. And I'm assuming that a suburban should improve market which means the core margin before ex-suburban margins should (technical difficulty) in the coming years. Is that because you would be making higher investments if you can just run it through your cost?

Question: Shaleen Kumar - UBS Securities India - Analyst : First of all, I'm not sure if you have already answered this question (technical difficulty) because I got dropped off for like four, five minutes in between. I still ask here.

Question: Shaleen Kumar - UBS Securities India - Analyst : Is it better?

Question: Shaleen Kumar - UBS Securities India - Analyst : So sir, two parts of the question. First, you can see that our margins are improving and they are being consistently improving. And I believe that we've been investing in growth as well. So can you talk a little bit about how we are investing for future growth in terms of maybe a more (technical difficulty) accelerating our service -- patient service centers or entering into new segments. First part is that And second part, when will we see the impact of coming in? I mean (technical difficulty) type it out, but maybe (technical difficulty) could be any positive momentum on the growth maybe three months, six months down the line you see because of investments happening. So that's largely the questions.

Question: Shaleen Kumar - UBS Securities India - Analyst : Is it right to assume that the intensity of our efforts have gone up because of our healthy profitability, strong position in terms of the cash and all possibility, so the intensity either we (technical difficulty) first two, three quarter versus where we are right now should be better because of [AVR]. And hence, I'm not expecting step jump, but a gradual improvement should be followed if the intensity is high or intensity is increasing?

Question: Shaleen Kumar - UBS Securities India - Analyst : Alright, sir. Any new segment you're trying to top in like (technical difficulty) et cetera. So any kind of these kind of segments which you see a lot of (technical difficulty) getting excited about?

Question: Deven Kulkarni - Marcellus Investment Managers - Analyst : So for this quarter, effective tax rate is around 28% (technical difficulty) higher side. So just wanted to understand why is that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 07, 2024 / 12:00PM, DLPA.NS - Q1 2025 Dr. Lal PathLabs Ltd Earnings Call

Question: Deven Kulkarni - Marcellus Investment Managers - Analyst : Okay. Got it. Secondly, currently what's the net cash position as on 31 -- June 30?

Question: Abdulkader Puranwala - ICICI Securities Limited - Analyst : In the past, you've highlighted some of the tougher competition coming directly from hospitals where they are trying to forward integrate? Any thoughts on how we can tackle those or any measures we have already taken in that -- in those areas, if you could highlight.

Question: Abdulkader Puranwala - ICICI Securities Limited - Analyst : Sure. Understood. Next question with regards to the underlying growth in Q1, so if I exclude the 8% growth what you mentioned about suburban and Swasthfit, the balanced business also seems to have grown at 7%, 8%. So any thoughts over there? Is there some bit of a lumpiness and a few tests due to which the growth was in single digits.

Question: Abdulkader Puranwala - ICICI Securities Limited - Analyst : Got it. And one final one, if I may. So in terms of the margins for suburban s I mean, I understand, we have put considerable efforts to improve the margins here. But on a sequential basis also we did I think close to 17% last quarter and now it's close to 14%. So just wanted to understand is there any lumpiness into this business and on an annualized basis, what's the sustainable margin we should look forward for next two to three years' perspective,

Question: Pranav Chawla - Antique Stock Broking Limited - Analyst : Just one question majorly on your Delhi NCR market. Have you seen the growth rate of NCR slowing down over the past year when compared to the past year's performance?

Question: Pranav Chawla - Antique Stock Broking Limited - Analyst : So if we are seeing NCR that is our biggest geographies that continues to maintain its growth momentum. So which would be the market that we are seeing a slowdown as of now because NCR is among the biggest market that we have.

Question: Pranav Chawla - Antique Stock Broking Limited - Analyst : Correct. And sir, have you seen any change in patient behavior regarding because on our patient volumes have been pretty neutral for the past couple of quarters. Have you seen any improvement on this front?

Question: Pranav Chawla - Antique Stock Broking Limited - Analyst : So that's actually very helpful. Can you give us some color on FY25, '26 growth that you had internally projected?

Question: Pranav Chawla - Antique Stock Broking Limited - Analyst : For FY20 -- FY25 as well as FY26 any internal estimates that you (multiple speakers)--

Question: Pranav Chawla - Antique Stock Broking Limited - Analyst : Perfect. Sir, one last from my end. What is our strategy on cash utilization given that we have cash building up in our balance sheet? (multiple speakers) M&A is something that we're looking at?

Question: Ashutosh Parashar - Mirabilis Investment Trust - Analyst : So just a couple of questions. So on the 20 labs that we have planned to open this year, can you give us some color on those geographic spread of these labs. Are these largely to come up in the markets of Bihar and UP? And how many of these are planned for suburban?

Question: Ashutosh Parashar - Mirabilis Investment Trust - Analyst : Got it, sir. So on the suburban (inaudible) it's been some time since we have integrated the acquisition. So are there still some gaps on like testing mix and all that we have to address or we have largely addressed that.

Question: Ashutosh Parashar - Mirabilis Investment Trust - Analyst : Got it, sir. And just lastly on the Swasthfit trend. So what would be our average realization for Swasthfit (technical difficulty)--?

Question: Ashutosh Parashar - Mirabilis Investment Trust - Analyst : yeah.