Niche sectors largely managed to see the day of light this year. The healthcare business was one such space. The sector’s second-quarter earnings remained healthy and robust despite an overall economic slowdown.
The logical followup is which healthcare stock looks the most attractive going into 2020. Dr Lal PathLabs, Metropolis Healthcare or Thyrocare Technologies?
YTD returns
In the last one year, Dr Lal Pathlabs (DLP) has risen 50 percent while its competitor Metropolis Healthcare surged 46 percent since April 15 this year. Thyrocare Technologies was the worst performer of all, rising marginally by 3 percent.
Earnings picture
In terms of financial earnings over the recent years, DLP and Metropolis have a neck-to-neck fight. In the last five years, DLP’s gross sales surged 82 percent while Metropolis rose 67 percent. However, Thyrocare reported the highest gross sales rally of 120 percent in the last five years.
When it came to the highest net profit in the last five years, DLP reported a jump of 108 percent. While Metropolis and Thyrocare surged 84 percent and 91 percent respectively.
Financial ratios
While looking at the financial ratios, the key factors to look at are zero debt-to-equity and return-on-equity. On these parameters, DLP stood at a higher pedestal as it was sitting comfortably at zero net debt as compared to its other two competitors.
Eye on rating agency reports
Last month, CLSA published a research report on DLP, retaining the ‘buy’ rating on the stock with the target price increased to Rs 1,800 from Rs 1,330 earlier.
“The company's Q2 results were ahead of estimates, with another quarter of strong volume growth. Overall, volume remains the point of focus, helping the company expand into the rest of India and reducing dependence on its home market of Delhi/National Capital Region (NCR), it said. The brokerage has raised FY20-22 EPS estimates by 8-12 percent to reflect recent tax cuts”, said the report.
ICICI Securities initiated ‘Add’ on Metropolis Healthcare with a target price at Rs 1,365 per share.
The brokerage firm believes that Metropolis generated 41 percent revenue from high-value specialized tests which has resulted in a strong increase in the realization by >7 percent against a flattish to decline in realization for the peers. Volume growth has also improved over the past few quarters aided by aggressive network expansion with B2C focus over the past three years.
In the case of Thyrocare Technologies, Edelweiss maintained ‘Hold’ on the stock with a target price at Rs 620 apiece because the company is still based on the B2B model while its competitors are focused on providing a branded value-added play along with preventive tests e.g., doctor access and report tracking.
First Published: Dec 26, 2019 4:18 PM IST
