Dr Lal PathLabs slips 1.5% after SN Genelab acquisition; Nomura retains ‘Buy’, TP Rs 2,150

New business data points to the fact that Nomura has retained its 'Buy' call on Dr Lal PathLabs with a target price of Rs 2,150 after the diagnostics firm acquired a 70% stake in genomics testing firm SN Genelab for Rs 1.68 billion.

Dr Lal PathLabs markshares were trading at Rs 1,930.90, down 1.55% on the NSE at 11:08 am on September 25.

Nomura stated the acquisition "strengthens Dr Lal's presence in genomics testing and broadens its portfolio of advanced diagnostic services". SN Genelab is a Gujarat-based genomics testing firm focused on oncology, rare diseases and reproductive health.

Founded by Dr Salil Vaniawala in December 2013, SN Genelab is "at present a leader in genomics testing in India", according to Nomura. It operates a central reference laboratory in Surat and centres in Surat, Ahmedabad, Dubai and Ras Al Khaimah. Dr Salil will stay an integral part of SN Genelab and retain the remaining 30% stake.

SN Genelab noted topline of Rs 579.6 million in FY26 with an EBITDA margin of around 30%. Nomura stated this implies an Equity Value/Sales of 4.1x and Equity Value/EBITDA of 13.8x.

The firm has established capabilities in "Oncology, Reproductive Health & Gynaecologic Cytogenetics, Infectious diseases, rare genetic conditions etc.", Nomura stated.

The brokerage noted that Metropolis acquired Delhi-NCR-based Core Diagnostics, a genomics and advanced oncology testing specialist, in December 2024 for Rs 2.47 billion at 2.2x Equity Value/Sales. Unlike SN Genelab, that stated, Core Diagnostics was operating at EBITDA break-even at the time of the acquisition.

"These deals, in our view, highlight the increasing focus of organized Indian diagnostics players on adding high-end, specialized tests to their menus," Nomura stated. "The larger, organized chains are cash-rich and find these smaller bolt-on acquisitions a swifter route to building capabilities in high-end testing."

Nomura further noted that "volumes from these niche tests can scale up meaningfully on the larger platforms of these organized players".

The brokerage anticipates the acquisition to be "marginally EPS dilutive" for Dr Lal in the near term, but stated it presents "substantial potential for long-term value creation" once SN Genelab's testing capabilities gain wider reach through Dr Lal's network.

Nomura's Rs 2,150 target is based on 45x September 2028 EPS of Rs 47.7. DLPL at present trades at 47x Nomura's September 2027F EPS estimate of Rs 41.7, at the low end of the 40-60x P/E band that prevailed during the past three years.

"We expect DLPL to trade, at least, in its pre-COVID range of 40-50x one-year-forward EPS," Nomura stated, adding that its valuation is supported by firm volume expansion and a robust balance sheet that underpins its acquisition ambitions.