Shares of Dr Lal PathLabs Ltd have risen more than 78% year-to-date and now trade near fresh highs. The company, like its peers, benefited from the pandemic and associated surge in testing, coupled with rising non-covid volumes. Market share gains by organised testing laboratories, geographical expansions being undertaken by the company, and digital initiatives, among others, have helped drive growth.

Analysts at Edelweiss Securities Ltd expect a 22% CAGR rise in core pathology contributions during FY21-24. Given Dr Lal’s strong brand equity, improving geographical spread, and digital investments, it is well placed to benefit from structural tailwinds in the diagnostic industry, they said.

The company has adequately diversified its revenue stream and lowered its dependence in the Delhi National Capital Region, having expanded into other regions. It commenced pilot operations at Bangalore reference lab, and also in six satellite labs at Borivali and Vashi in Mumbai. More benefits are to accrue with the start of Mumbai reference lab, once it meet licensing requirements.

Analysts say large national-level pathology companies such as Dr Lal PathLabs could also tap partnerships with regional companies for revenue synergies. Some of the large labs in India are regional and do not have any material national presence. The company nevertheless will have to handle operational challenges associated.

Rising online opportunities, meanwhile, have also been providing growth opportunities. While multiple health tech platforms have emerged, offering integrated healthcare services, such as e-pharmacy and tele-consultation,a nalysts at Motilal Oswal Financial Services Ltd (MOFSL) believe that diagnostic chains will have the upper hand due to their expertise in testing. Unlike other services and e-commerce activities, the quality and accuracy related with pathology tests remain the most important.

Dr Lal is a debt-free, cash surplus company and has maintained a three-pronged strategy for capital utilisation, said a recent report by MOFSL. Dividend payment and investments in the business, such as in technology, new machines/instruments, and expanding lab network, have remained key strategies. Inorganic expansions remain the third important aspect which company is regularly working on.