Broker’s call: Dr Lal Pathlabs

Dr Lal Pathlabs (DLPL) has confirmed its acquisition of SN Genelab, a B2B diagnostics company specializing in advanced genomics and molecular pathology testing, for ₹168 crore, representing a 70 percent stake. This valuation places SN Genelab at around 16 times its forecasted 2026 EV/EBITDA multiple. The acquisition is anticipated to result in revenue synergies within the next 2-3 years.

DLPL aims to leverage SN Genelab's offerings through its existing B2B and B2C platforms, expanding their product portfolio and diversifying revenue sources, particularly in the West region, which contributed 14 percent to DLPL's 2026 revenue. Valuing the acquisition as reasonable, given SN Genelab's solid financials and consistent growth, DLPL's strategic position and execution capabilities are expected to capitalize on current industry advantages, such as stable pricing, a trend toward well-organized operators, and rising demand for preventive testing.

The company projects a 15/16 percent compound annual growth rate (CAGR) in revenue and EBITDA from 2026 to 2029, excluding the acquisition, and maintains a "Buy" rating. An increase of 5 percent in the September 27 earnings per share target to ₹2,100 from ₹2,000 is announced, based on the discounted cash flow (DCF) method, which results in a FY28 earnings per share (EPS) multiple of 48 times, aligning with DLPL's market valuation.

Potential risks include an irrational pricing environment, inflationary pressures arising from the ME crisis, and disruptions in the supply chain for raw materials.