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In line quarter; volume growth still lackluster

Result Synopsis

Dr Lal reported largely in line quarter as sample growth yet again outpaced volume expansion. Swasthfit share continues to rise YoY which is driving large part of realization improvement. Margin strength is consistently evident even as management alluded to higher opex in H2 leading to lower projected margin for the second half. With no visible price hike in FY25, expect bulk of the per patient realization to come from mix change and small contribution from geography/product mix. We marginally tweak our realization and 50bps higher gross margin resulting in 3-4% change to FY25 and FY26 estimates. Retain SELL based on unchanged 40x as reckon there is unlikely to be a revenue surprise in the near term that precludes meaningful upgrades.

Result Highlights

Dr Lal reported ~10% YoY revenue growth vs expected ~11% YoY Likely weaker Sep first half in terms of post rainfall disease pattern led to worse than expected volume weakness as patient footfall up just ~3.9% YoY Swasthfit continues to add to samples as sample growth at 8.6% YoY Margin at 30.7% (+110bps YoY) posted a slight miss to our ~31% expectation on higher-than-expected other expenses PAT up 18% YoY on lower interest cost YoY

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