Dr Lal PathLabs Q2 profit slumps on falling Covid income, higher expenses

Indian medical diagnostics firm Dr. Lal PathLabs Ltd on reported a 24.5% drop in September quarter profit as a sustained decline in revenue and volume from its Covid-19 related business

Indian medical diagnostics firm Dr. Lal PathLabs Ltd on Tuesday reported a 24.5% drop in September quarter profit as a sustained decline in revenue and volume from its COVID-19 related business and higher expenses weighed on margins.

Consolidated profit for the quarter ended Sept. 30 came in at 717 million rupees ($8.76 million), compared with 950 million rupees a year ago, the company said in an exchange filing.

(Graphic: Falling profits - https://graphics.reuters.com/DRLALPATHLABS-RESULTS/gkplwmyzovb/chart.png)

Analysts on average had expected a profit of 769.8 million rupees, according to Refinitiv data.

Total expenses rose 15.1% to 4.40 billion rupees, while quarterly revenue from operations rose 7.1% to 5.34 billion rupees.

A string of diagnostic firms, including New Delhi-based Dr. Lal PathLabs, made windfall gains from the pandemic, with millions getting tested for coronavirus infection.

However, with competition intensifying amid a slew of new brand launches, including Tata Group-backed 1mg and Reliance Industries-owned Netmeds, analysts are turning sceptical of Dr. Lal PathLabs' prospects.

"We believe margins reported during FY21 (peak of COVID-19) will not be repeated anytime soon and the industry will revert to its long-term revenue growth in the range of 10% to 12%," analysts at Antique Stock Broking wrote in a report in September.

The share of revenue from COVID and allied business slumped to just 3.7% from 10.1% last year. Revenue from the non-COVID business climbed 14.7% to 5.14 billion rupees, the company said in an investor presentation.

(Graphic: Revenue breakup for Dr. Lal Path Labs - https://graphics.reuters.com/DRLALPATHLABS-RESULTS/zjvqjqzlgpx/chart.png)

"Instead of increasing the test prices, we are focusing on driving volumes to achieve scale benefits, thereby maintaining our margins," said Om Manchanda, managing director of Dr. Lal PathLabs.

Earnings margin before interest, taxes, depreciation and amortization fell to 26.9% from 28.4%.

The firm would continue to invest in expanding to smaller towns and cities across the country, Executive Chairman Arvind Lal said.

($1 = 81.8900 Indian rupees)

 

(Reporting by Nandan Mandayam in Bengaluru; Editing by Sherry Jacob-Phillips and Dhanya Ann Thoppil)