Dr. Lal PathLabs Ltd Q4 2024 Earnings Call Transcript

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

Question: Binay Singh - Morgan Stanley - Analyst : Hi. Thanks for the opportunity. I had three questions. Firstly, on the industry growth and competitive intensity. Any sort of update from what you shared last call, any changes that you see there in? The second question I have is on the Suburban side. If you could talk a little bit about the growth you are seeing, and fair to believe that the initiatives you talked about sampling promotion, brand building, these are more recent. What kind of traction you expect going ahead? And lastly, on the -- just the number of tests that you report in the presentation. We see a sharp drop in the tests under radiology from 1,947 to around 1,400 in this quarter. So any read through from that?

Question: Binay Singh - Morgan Stanley - Analyst :

Question: Binay Singh - Morgan Stanley - Analyst : Anything on market share of Suburban in Mumbai? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 10, 2024 / 10:00AM, DLPA.NS - Q4 2024 Dr. Lal PathLabs Ltd Earnings Call

Question: Binay Singh - Morgan Stanley - Analyst : Great. This is Binay from Morgan Stanley. So I think maybe they got the name wrong. But also congratulations on almost completing 75 years, big milestone. Congrats on that.

Question: Ahmed Singh - JM Financial - Analyst : Thank you for all of the opportunity and congrats on a good set of numbers to the management. The first question I have is, is it possible for us to gain volume growth for Delhi and rest of the North India Asia region. And second, in Delhi we are seeing a lot of hospital chains coming back to their own lab business. There is a captive business as well, but they're also venturing into the outside market. So are you seeing the impact of this activity on your business?

Question: Ahmed Singh - JM Financial - Analyst : Sure. And the second question I have is on Tier 3 competition, which is around 34%. Is it possible for us to give example of the cities, what you consider in the Tier 3? And the second thing is that we see in the labs as a proportion of total labs around 40%, but the PUP number seems to be on the higher side, the collections number seems to be on a higher side. So is the business model a bit different, you need to invest much more on the collection center side when you go for the Tier 3?

Question: Ahmed Singh - JM Financial - Analyst : Sure. So is it because of the scale of the margins of this business will be similar to our company average or how that will be?

Question: Kunal Randeria - Axis Capital Ltd. - Analyst : So just going through some of the operating parameters like the number of labs, the pickup points and so on. So at a consol level, you run, let's say, three labs in the last two years and around 1,000-odd pickup points, right. But if I were to look at Tier 3 centers, there you have added maybe 15 labs and maybe 1,600 or 1,500 pickup points. So it basically means that you're scaling back in your Tier 1, 2 cities. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 10, 2024 / 10:00AM, DLPA.NS - Q4 2024 Dr. Lal PathLabs Ltd Earnings Call So while I understand you're doubling down on Tier 3, but scaling back is something that I don't completely understand. Is this competition? Or is it maybe some inefficiencies which have crept in and you are just trying to sort of rationalize it going forward?

Question: Kunal Randeria - Axis Capital Ltd. - Analyst : Sure. And the same kind of logic applies on the pickup points also because there also seen a number of pickup points seems to have gone down in Tier 1 and 2s?

Question: Kunal Randeria - Axis Capital Ltd. - Analyst : Sure, sir. And just carrying forward on that. Any particular region, not Tier 3, any particular region you would like to call out, which has surpassed expectations and where would you look to expand further?

Question: Kunal Randeria - Axis Capital Ltd. - Analyst : Got it, sir. And just one more, if I can. So Swasthfit contribution is 24% of revenue is probably the highest, I think. So what is the kind of headroom you see over here?

Question: Nitin Agrawal - DAM Capital Advisors Limited - Analyst : Just taking forward your previous comments. This bundled tests, obviously, moving up the overall realization per patient. I mean, where do you think this number really ends up? At what stage it will start to, in your assessment stops growing? Because we've had a consistent quarter-on-quarter growth on this number for the last several quarters now.

Question: Nitin Agrawal - DAM Capital Advisors Limited - Analyst : And sir, I guess, based upon your comment, probably in the past, you were tracking the patient volume growth number more closely, given the way the dynamics in the market are playing, probably you think sample growth, probably the more apt number to look at as things are. But are we --

Question: Nitin Agrawal - DAM Capital Advisors Limited - Analyst : Okay. And secondly, on the cost part of it. We've had a pretty sharp jump up in our gross margin this year. I mean how much scope do we have for that to squeeze out more, especially at the gross level -- contribution level? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 10, 2024 / 10:00AM, DLPA.NS - Q4 2024 Dr. Lal PathLabs Ltd Earnings Call

Question: Pranav Chawla - Antique Stockbroking - Analyst : Hi, good evening. Congratulations on a good set of numbers. So I just wanted to ask what is our regional mix for the fiscal. We used to highlight the split between Delhi NCR, southwest, international east and north. Can you provide this?

Question: Pranav Chawla - Antique Stockbroking - Analyst : Sir, for the fiscal?

Question: Pranav Chawla - Antique Stockbroking - Analyst : International as well. Sir, and what is our B2B, B2C mix for the fiscal?

Question: Pranav Chawla - Antique Stockbroking - Analyst : Okay. Perfect. Sir, just can you provide us a color on how the competition has been in a core market of Delhi NCR? And how the region of Mumbai has been doing? How Suburban is growing? Even if you can share the quarterly revenue number of Suburban, that would be great. .

Question: Pranav Chawla - Antique Stockbroking - Analyst : Okay. Sir, then can you just give us some broad color on Delhi NCR fusion, like how is the competitive intensity, pricing, realization, et cetera, as well as -- just for Delhi NCR?

Question: Prakash Kapadia - Spark PMS - Analyst : Thanks for the opportunity. I have two questions. If I look at the Swasthfit's contribution. It has been increasing. It has been doing well for us. So is it currently just a few top cities or metro specific, is there a scope to take this beyond some of the top cities? That's my first question. And secondly, if I look at where the industry is, given that some of the price increase has happened, competitive intensity has stabilized or decreased. So from year on, if I were to build a scenario of doubling our patient count of 27.5 million, 28 million over the next few years, what are the key REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 10, 2024 / 10:00AM, DLPA.NS - Q4 2024 Dr. Lal PathLabs Ltd Earnings Call variables which will get us there? Is it convenience? Is it accuracy? Is it increased genomics contribution? Is it doctor advocacy, if you could give some direction on those parts will be helpful.

Question: Prakash Kapadia - Spark PMS - Analyst : I get to the point of price increases, not the route. But in terms of the patient volume growth, I'm just trying to envisage a scenario what will that one or two variables be? Because in terms of branding, we are one of the oldest companies. In terms of cost per sample, we are amongst one of the best. So why is that volume growth not really coming through for us? So is it going to be some of the newer tests, which will contribute more or some specific convenience factor from a consumer standpoint? I was more trying to understand that.

Question: Anshul Agrawal - Emkay Global Financial Services Ltd. - Analyst : So considering in the last quarter, we have seen some upward pricing action from online players as well as other national chains. Do you believe that our volume growth is a result of this pricing action since you have not taken any hikes and follow-up on that would be then could these be our sustainable volumes considering that we are not looking to take a price hike in the next few quarters?

Question: Anshul Agrawal - Emkay Global Financial Services Ltd. - Analyst : Got it. And another question on competitive intensity, Dr. Om, if I may. So considering that one of the other listed regional chain is getting very aggressive in Pune. How do we aim to protect or expand our market share or Suburban's market share in the Pune region? Are there any thoughts around this? Any strategy?

Question: Anshul Agrawal - Emkay Global Financial Services Ltd. - Analyst : Sure. Just one last question from my end. Any sense on what would our SSG volume growths would be for the current year and the contribution from the new centers?

Question: Anshul Agrawal - Emkay Global Financial Services Ltd. - Analyst : Got it. Very clear. Just one last question from my end for Ved-ji probably. Just as you mentioned that gross margins would remain range bound. Any thoughts around EBITDA margins, given our expansion plan?

Question: Jainil Shah - JM Financial - Analyst : Hi. Thanks for the opportunity and congratulations on a good set of results. My first question is on our guidance for next year. So we alluded to our growth being higher in FY25. So just wanted to understand how much will be volume driven and how much will be price-driven and how much growth are we budgeting for Suburban here?

Question: Jainil Shah - JM Financial - Analyst : Sure. And would you say that FY24, at least 4Q, we would not be having any COVID revenues? So essentially, we've grown at around 14% on a non-COVID base?

Question: Jainil Shah - JM Financial - Analyst : More or less, yes.

Question: Jainil Shah - JM Financial - Analyst : And just wanted full year revenue and EBITDA for Suburban?

Question: Jainil Shah - JM Financial - Analyst : FY24, yes.

Question: Jainil Shah - JM Financial - Analyst : And EBITDA would be? Or we are incurring losses there because of the new law?

Question: Shaleen Kumar - UBS Securities India - Analyst : A good set of numbers. Sir, just a clarification, right? Most of my questions have been answered. So Ved sir has been saying that our margins should be pre-COVID level 26%, right? But you have already delivered more than 27%. And I understand, let's say, gross margin remains where they are, but there is definitely going to be operating leverage. Now two things can happen from here, either your margins will expand or probably you said you want to invest in growth, which means that growth exploration should happen, right? So is my understanding right that you have decided to invest in growth and then the growth uptick will happen while margin may remain where they are, with a lag, that's okay, but that's the idea, right?

Question: Shaleen Kumar - UBS Securities India - Analyst : Which is fine, sir. My question was that, that will reflect in our growth, maybe with a lag over a medium term, right? So that's the way we should look at it, right? And the main part of that will come in --

Question: Shaleen Kumar - UBS Securities India - Analyst : Which is fine with us, sir. I just wanted to have a clarification on that.

Question: Shaleen Kumar - UBS Securities India - Analyst : Would you actually answer my second question, because you're already close to INR1,000 crores of cash. And I mean, you will be generating roughly INR400 crores of cash on average. So is this something, which we can expect in the near term in terms of the organic --

Question: Pranav Chawla - Antique Stockbroking - Analyst : I think we highlighted we plan to add around 20 hubs going forward. So can you allude us, what time line and what CapEx kind are we looking at? And what regions this will be in?

Question: Pranav Chawla - Antique Stockbroking - Analyst : Perfect. And sir, what markets we'll be looking for inorganic expansion? Because I think Calcutta, we have been -- east, we have been trying to grow organically and still the size of the business is pretty small. Same is the case with I think West is also now at 15%. So what target markets we'll be looking at?

Question: Pranav Chawla - Antique Stockbroking - Analyst : Sir, any large players or large competition in these markets like that we may explore, like number two, number three players that may be --

Question: Dheeresh Pathak - WhiteOak Capital - Analyst : I'm sorry if you already answered this sir, but for the full year and for the quarter, if you can just give how much growth came from pure realization

Question: Dheeresh Pathak - WhiteOak Capital - Analyst : Just from price increase, not coming from any mix effect or anything. Just your price increase, how much growth came for the full year and for the quarter?

Question: Dheeresh Pathak - WhiteOak Capital - Analyst : And this is annualized in this year? This got annualized in Q4 now, right?

Question: Dheeresh Pathak - WhiteOak Capital - Analyst : 1%, okay. And provided if you don't take any price increase further, then this will be almost negligible in the coming quarters, right?

Question: Sumit Gupta - Centrum Broking - Analyst : Thank you for the opportunity. So just want to understand about like pricing for overall test menu. So just can you highlight like how much is the specialized test menu? Like what kind of price increase are you taking in the specialized menu versus obviously the routine test?

Question: Sumit Gupta - Centrum Broking - Analyst : Okay. And how much is the specialized test menu as the overall test menu -- specialized and overall test menu?

Question: Shaleen Kumar - UBS Securities India - Analyst : Thank you for taking the question again. So when you said you know that you will be delivering better performance compared to FY24 and there will not be any price increase there, right? So assuming that our sample per patient growth would be similar of what we have in FY24, so we are looking at roughly high single digit of volume patient growth. Is that the right thing? At least, if not high, that means it is something like 7%-odd kind of a growth?

Question: Shaleen Kumar - UBS Securities India - Analyst : No, no 6%, 7%, not 10%. 6%, 7%.

Question: Shaleen Kumar - UBS Securities India - Analyst : So basically, even if 12% revenue growth we're looking at, 5% coming from higher tests, then rest can come from (technical difficulty)