Dr Lal Path Labs, Metropolis Healthcare shares slip for 3rd day in row, hit new 52-week lows; yet brokerages remain bullish on these scrips - know why?

Diagnostic companies Dr Lal Path Labs and Metropolis Healthcare shares were reeling under the pressure on Wednesday and declined even when the markets were trading in the green. The stocks hit their 52-week lows on the BSE on the intraday basis.

Individually, Dr Lal Path Labs shares slipped over 7.5 per cent to Rs 2019 per share, while Metropolis shares declined by over 9 per cent to Rs 1755 per share on the BSE intraday. Both the stocks have been witnessing a downward rally since Monday, as they slipped up to 13 per cent in three days.  

The weakness in the stock for the last three days came mainly on the disruption estimates by Tata 1mg in the diagnostic segment. The company on a pilot basis in Bengaluru has launched crucial tests like Thyroid Profile, Liver Function, Lipid Profile, and Diabetes Screening at Rs 100 per test. 

Zee Business senior research analyst Varun Dubey, earlier this week, had said that a big hit of around 40-50 per cent on the profitability of diagnostic companies like Metropolis Healthcare & Dr Lal Path Labs among others is likely expected amid Tata’s B2C disruption strategy in the sector. 

YES Securities cut Dr Lal Path Labs’ volume growth estimate in FY23 amid increased competitive intensity and the management’s choice of not going after a cash burning-model driven competition.  

Suburban revenues are also expected to share a similar cut with revenues lower than last non-Covid full year sales, YES Securities said, reducing FY23/24 estimates in a meaningful manner. It suggested an Add rating on the stock with a target price of Rs 2900 per share, implying a 33 per cent upside.  

The management commentary of Metropolis pointed towards near-term turbulences, leading to FY23 being a year of normalization for Metropolis, ShareKhan said. “Increased competitive intensity as new players have entered the diagnostic space, test mix shifting in favour of non-COVID tests, and a slower-than-expected pick up in government business would play near-term dampeners.” 

Over the past six months, the stock price has corrected sharply by around 43% due to these near-term concerns; however, as long-term growth levers are intact, ShareKhan said retaining a Positive view on the stock.