Thyrocare, Lal Pathlabs: Diagnostic stocks trade weak. Should you worry?

Stocks of diagnostic firms such as Dr. Lal Pathlabs and Metropolis Healthcare slipped in trade today. This seems to be a rub-off effect of Thyrocare Technologies that lost ground after Docon Technologies, along with API Holdings, the parent company of unicorn PharmEasy, an online medical platform, said it will acquire 66.1 per cent equity stake in diagnostic chain firm for Rs 4,546 crore.

This would be the first ever acquisition of a listed company, by an Indian unicorn, the companies said in a joint statement. "It is the third big-ticket transaction involving an e-pharmacy company," they said. READ ABOUT IT HERE

"We revise up our target multiple to 45x September 2022 EPS (from 35x June 2022E EPS) given structural tailwind around unorganised to organised, better preventive care prospects, deeper penetration and wider reach. This yields a target price of Rs 1,450 (earlier Rs 985). We continue to maintain 'hold' rating on the stock," wrote Kunal Randeria and Aashita Jain of Edelweiss Securities in a report.

Adding: "We acknowledge the fact that the acquisition of Thyrocare by PharmEasy puts it into a different league than its traditional diagnostic peers. Players have realised that online is the way forward and value lies in creating an integrated ecosystem by bringing doctors, diagnostic labs and pharmacies to patients and insurance companies to enable an end-to-end customer journey. This, we believe, opens the window for higher valuation framework."

Meanwhile, Thyrocare has surged over 37 per cent in June, 2021 claiming a new all-time high of Rs 1,465 levels. Some analysts, however, believe investors in Thyrocare may not gain much by staying put in the company following the Rs 4,546-crore buyout of the promoter’s stake by API Holdings. READ ABOUT IT HERE

That said, given the weakness seen on Monday, should you be worried regarding stocks from this sector? Here is how they look on the charts.
 
Dr. Lal Path Labs Ltd (LALPATHLAB)
Likely target: Rs 3,500 and Rs 3,700
Upside potential: 6% and 12%

The overall trend in the counter suggests that it is well-placed above the 50-days moving average (DMA) currently located at Rs 2,945 levels. The current momentum indicates a hurdle around Rs 3,300 levels. However, until the stock defends the closing basis sentimental support of Rs 3,000, the upside bias remains. On the other hand, a decisive breakout above Rs 3,300 levels may result in an upside towards Rs 3,500 and then Rs 3,700 levels, as per the daily chart. CLICK HERE FOR THE CHART
 
Thyrocare Technologies Ltd (THYROCARE)
Outlook: Stake buyout has seen a weakness in the stock

With the current news of stake buyout, the counter has seen a weakness considering the unattractiveness of the deal. That’s said, before this event, the stock had seen a good upside in the overbought category of Relative Strength Index (RSI), which was indicative of a positive price action. The current trend shows weakness and the counter may retest the support of Rs 1,270 levels. The overall upward bias is intact until the counter upholds the support of Rs 1,270 on a closing basis. The immediate support comes at Rs 1,325 levels. CLICK HERE FOR THE CHART
 
Metropolis Healthcare Ltd (METROPOLIS)
Likely target: Rs 3,200 and Rs 3,300
Upside potential: 6% and 10%

The counter has seen profit booking above Rs 3,000 levels, which was the overbought category of RSI. A breakout above this resistance may see an upside in the stock towards Rs 3,200 and Rs 3,300 levels. The support for current weakness stays at Rs 2,700 levels. The medium-term trend is positive above the 50-DMA, which is placed at Rs 2,532 levels, as per the daily chart. CLICK HERE FOR THE CHART