HDFC Sec turns bullish on Dr Lal PathLabs; upgrades to 'Buy'; raises target

Dr Lal PathLabs is focusing on innovation, including new wellness packages and high-end, super-speciality tests, with a focus on capturing prescription shares

HDFC Securites on Dr Lal Path Labs: Brokerage firm HDFC Securities has turned bullish on diagnostic services provider Dr Lal PathLabs (DLPL), upgrading the stock to 'Buy' from 'Add', citing expectations of sustained revenue momentum on the back of steady patient and sample volume growth, increasing traction from its wellness segment, portfolio innovation, and expansion strategy to drive volumes.

 

"We expect DLPL’s future growth to be driven by a combination of strengthening of operations in core metro and Tier-1 cities; penetration in tier-3/4 cities in the North and East; plus building of clusters in the South and West regions," the brokerage said in its note. 

 

 

Additionally, the company is focusing on innovation, including new wellness packages and high-end, super-speciality tests, with a focus on capturing prescription shares.

 

On Wednesday, December 31, Dr Lal PathLabs stock rose over 1.5 per cent to hit an intraday high of ₹1,483 on the NSE. Around 02:15 PM, the stock was trading at ₹1,480.80, up 1.56 per cent from the previous session's close of ₹1,458. In comparison, the benchmark NSE Nifty50 was trading at 26,166 levels, up by 227.10 points or 0.88 per cent.

 

The brokerage has revised the target price to ₹1,740. The valuation is based on 44 times Q3 FY28E earnings per share (EPS), which reflects about a 10 per cent discount to the company’s average price-to-earnings (PE) multiple of 49 times, offering valuation comfort. This translates into an implied EV/Ebitda multiple of 29 times. The target price implies an upside potential of around 19 per cent from the previous session's close.  CATCH STOCK MARKET LIVE UPDATES TODAY

Here's why HDFC Securities is bullish on Dr Lal PathLabs:

Steady volume-led growth visibility: The brokerage expects the company to sustain its growth momentum, supported by a strengthening presence in key markets, a wider reach in tier II and III cities, expansion in South and West India through improved infrastructure and brand outreach, and the scaling up of franchise collection centres. The company plans to add 15–20 new laboratories and 600–800 collection centres in FY26.

 

Margin stability remains key: DLPL’s margins are expected to remain stable at around 28.5 per cent over the next few years, supported by a higher share of specialised tests and wellness business, better utilisation of assets through improved efficiency at collection centres and labs, and tighter cost control. These factors are expected to offset the near-term margin pressure from network expansion.

 

Strong cash position enables M&As: The company had a cash balance of ₹13.67 billion as of September 2025, providing financial flexibility to pursue acquisitions, particularly in South India, expand its specialised test portfolio, and explore adjacent areas such as radiology.

 

Competitive intensity moderating: According to HDFC Securities, while competition in the diagnostics industry is likely to remain, the pace of new lab additions in the unorganised segment is slowing. It added that test pricing remains stable across traditional players, new-age companies, and online peers.

 

Steady outlook: Analysts at HDFC Securities noted that DLPL delivered strong growth between FY19 and FY25, with sales posting a 13 per cent compound annual growth rate (CAGR) and Ebitda rising at a 15 per cent CAGR. Looking ahead, they expect the company’s sales to record an 11 per cent compound annual growth rate over FY25–28E. Ebitda margins are projected to remain largely stable at around 28.5 per cent by FY28E, compared with 28.3 per cent in FY25. This is expected to translate into a CAGR of 12 per cent in Ebitda and 15 per cent in earnings per share (EPS) over the FY25–28E period.  (Disclaimer: Target price and stock outlook has been suggested by HDFC Securities. Views expressed are their own.)