Testing demand

The outbreak of coronavirus has fuelled a mini rally in pharma and healthcare stocks and Dr Lal PathLabs has been one of the beneficiaries of this surge. The diagnostic and healthcare service provider’s stock rose 5% to Rs.1,706 over the past one month. As the stock rallied, CEO Om Prakash Manchanda sold shares worth Rs.43.59 million on March 5, his second tranche in FY20 after he sold shares worth Rs.18 million in May 2019. His remaning 1.73% stake is worth Rs.2.36 billion. 

Though the stock has come off in the wider market meltdown to Rs.1,634, as of March 9, over the past one year, it bounced back from its 52-week low of Rs.955 to hit an all-time high of Rs.1,846 in February. It’s not just Manchanda, other promoters, top management and employees also cashed in on the rally, disposing shares worth Rs.270 million.

The buoyancy comes on the back of robust financial performance, wherein revenue and operating profit have zoomed by 14% and 26% to Rs.10.28 billion and Rs.2.86 billion, respectively, for 9MFY20. This has made analysts bullish on the company. “With strong cash flow and growth in new customers and packaged offers, the company expects to maintain growth in FY20. The expansion of bundle-test offer and gradual ramp-up of the central lab in Kolkata will improve further volume addition in FY20 and FY21,” wrote analysts at Prabhudas Lilladher in a report.

Mutual funds are buying into the story, having increased their stake from 6.62% in March 2019 to 7.73% in December 2019. Mirae Asset MF has been the most aggressive, ramping up its stake from 1.65% to 2.60%, while uti mf marginally reduced its holding from 2.84% to 2.45%. Foreign investors, too, increased their exposure — from 17.75% to 20.34%.