Gradual volume growth, valuations to cap diagnostic majors' returns

Riding on the back of network expansion and steady pricing, organised diagnostic players delivered a 14 per cent sales growth in the June quarter. Strong operating leverage in the business drove a 151 basis points year-on-year (157 basis points on a sequential basis) expansion in margins to 28.7 per cent for the sector.

Easing of pressure from predatory pricing and steady network expansion is boosting growth for diagnostics companies, say Abdulkader Puranwala and Nisha Shetty of ICICI Securities.

Post the June quarter results, some brokerages have upgraded their earnings estimates for the larger players and this has reflected on the