Diagnostics shares gain up to 15% intraday as Covid cases in India rise; Krsnaa Diagnostic, Vijaya Diagnostic among top gainers
According to brokerage firm IIFL Securities, “The Indian diagnostics industry offers consistent and long-term growth potential of around 11-12 per cent, and national diagnostic chains would continue to outperform industry growth.”
As Covid cases in India rise and concerns grow, shares of diagnostic firms now come in focus. Many diagnostics stocks witness a surge of up to 15 per cent on the BSE in the intraday trade on Wednesday. With 2,067 new Covid-19 infections being reported in a day, the active cases rose to 12,340, as per government data on Wednesday.
On Tuesday, Delhi recorded a nearly 26 per cent jump in fresh COVID-19 cases. The health department said 632 fresh cases were reported on Wednesday with 4.42 per cent positivity rate.
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Krsnaa Diagnostics shares surged most by over 14 per cent to Rs 640 per share, followed by Vijaya Diagnostics Centre up over 12.5 per cent to Rs 474 per share on the BSE intraday trade.
While other diagnostic companies such as Metropolis Healthcare, Dr Lal Path Labs and Thyrocare each surged between 3 and 4 per cent to Rs 2526.5, Rs 2811, and Rs 882 per share on the BSE intraday trade today.
According to domestic brokerage firm IIFL Securities, “The Indian diagnostics industry offers consistent and long-term growth potential of around 11-12 per cent, and national diagnostic chains would continue to outperform industry growth.”
Given increasing health awareness post-Covid, a higher share of wellness, specialized and home collection segments will continue to aid realizations, the brokerage added.
IIFL Securities believe the fragmented market structure provides consolidation opportunities to larger players. Besides, it suggests that margin pressures led by increasing competitive intensity from hospital-based labs and pricing cuts might be necessary to accelerate the consolidation trend.
On the contrary, Vanyasree Paila, Senior Analyst at India Ratings said, “The outlook for the diagnostic companies’ sub-sector is also neutral for FY23, supported by a recovery in non-COVID-19 related revenue and moderate demand for COVID-19 tests, robust cash generation, and strong credit profiles.”
While increasing competition and acquisition-led expansion could compress margin, the headroom available to absorb shocks remains comfortable, the analyst added.
The Delhi government during the Delhi Disaster Management Authority meeting on Wednesday made wearing masks mandatory in public places and imposed a fine of Rs 500 on violators in view of a spurt in coronavirus cases in the city.
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