Om Prakash Manchanda, CEO, Dr. Lal PathLabs, recently made a cool Rs 11.8 crore by selling 100,000 shares from his personal holding. Post the transaction, Manchanda’s stake is down to 0.85% from 0.97%.
The diagnostic chain operator not only saw its IPO oversubscribed 33x in December, 2015, it has also seen continued interest in the secondary market. In 2016, the stock is up 47%. In fact, over the past month, it has gained about 13% as investors price in the increased revenue due to the dengue and chikungunya outbreak in north India.
Manchanda has sold his shares just after the company reported a strong second quarter for FY17. The Gurgaon-based company reported a growth of 21% in revenue and a 100% jump in profit of Rs.262 crore and Rs.52.5 crore. Post the result, Dr. Lal PathLabs trades at 48x estimated FY18 earnings.
Analysts believe the stock is fairly valued and could see a brief pause in its rally till new triggers emerge. “We raise our DCF-based target price of Rs1,190/share (earlier Rs1,138), and this would imply a P/E of 46.5x FY18E and 37.7x FY19E and EV/EBITDA of 30.3x FY18E and 24.8x FY19E.”
After establishing a national reference laboratory in New Delhi, the company is looking drive the next phase of growth by expanding its footprint in east and central India by opening two additional regional reference laboratories. Analysts expect its top-line to expand at 20.5% CAGR over FY16-FY19 and its bottom-line to grow at 25.5% CAGR. They also believe the strong free cash flow generation should continue in the future, given the asset-light business model and its practice of taking medical equipment on lease.
No wonder, institutional investors like Westbridge Crossover, Wagner and Sanjeevini Investment Holdings did not fully cash in during the IPO and continue to hold 12.86%, 9.19% and 1.08% respectively. Domestic fund houses together hold a 5.1% stake with SBI AMC accounting for 2.35%. DSP Blackrock has a 0.25% stake with the rest being scattered among BOI AXA, Birla Sun Life, Goldman Sachs and Sahara.