The diagnostics industry enters FY27 with steady demand and expanding volumes, as firms focus on technology and regional strength to sustain margins amid cautious pricing strategies, says Business Standard and brokerages.
Diagnostics companies are heading into the rest of FY27 with a supportive mix of steady demand, firmer volumes and little sign of price wars returning, according to Business Standard and several brokerages. That has helped listed players deliver strong share-price gains over the past six months, even as analysts say the sector’s recent rally has reduced some of the immediate upside.
The latest quarter reinforced that view. Kotak Research said Dr Lal PathLabs and Metropolis Healthcare posted combined sales growth of 18% year on year and 11% sequentially, helped by higher test volumes, better realisations and continued strength in business-to-consumer demand. Across the companies it tracks, cumulative test volumes rose 11% and patient volumes increased 8% in the quarter, while operating profit climbed 29% and operating margin widened to 28.7%, showing that scale rather than aggressive pricing is still doing much of the work.
Other brokerage notes point to the same pattern. 360 One Research said diagnostics firms produced solid profitability even in what is usually a softer period, with operating profit up 27.5% and margins rising to 30.5% for its coverage universe. It said the market is increasingly focused on specialised services such as genomics, histopathology and advanced radiology, where incumbents with stronger technology and wider networks have an advantage. Emkay Research added that September quarter demand is usually seasonally stronger and that the industry may be moving beyond the intense discounting seen in earlier years.
For now, pricing remains the main variable to watch. Brokerages said listed chains have largely kept prices unchanged so far this year, helping them protect margins and win market share from smaller rivals and online competitors. 360 One Research said reagent and solvent costs have risen because of tensions in West Asia, but companies do not expect a major near-term hit and have not planned broad price increases, even though passing on higher input costs remains an option. Morgan Stanley, meanwhile, has raised its target on Metropolis after another quarter of healthy volume growth, though it still prefers Dr Lal PathLabs for its larger scale and stronger return profile.
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