Motilal Oswal has started coverage on Laxmi Dental with a 'Buy' rating and a target of Rs 280, following a strong Q1 performance. The company posted 14% revenue growth, driven by international markets and its aligner segment. However, investors should note a sharp rise in working capital requirements, which is a key area to watch moving forward.
Motilal Oswal has begun coverage on Laxmi Dental, a dental solutions manufacturer, with a 'Buy' rating and a target price of Rs 280. The brokerage firm is optimistic about the company’s growth trajectory following its recent financial results for the first quarter of fiscal year 2027.
The company’s Q1 results showed notable progress. Revenue for the quarter rose by 14% compared to the previous year, reaching Rs 74.7 crore. Profitability metrics were even stronger, with Profit After Tax (PAT) increasing by 23% to Rs 10.3 crore, and EBITDA—which measures operating profit—climbing by 20.6% to Rs 14.4 crore. These figures outperformed initial market expectations by 14% for profit and 11% for operating earnings.
The company's growth is being fueled by strong demand in international markets and a revival in its dental aligner business, which involves devices used to straighten teeth. As India’s only fully integrated dental solutions provider, the firm is aiming to capture a larger share of the sector. Looking ahead, the brokerage expects the company to maintain a strong pace, projecting a Compound Annual Growth Rate (CAGR) of 18% in revenue and over 30% in both EBITDA and PAT through the fiscal year 2028.
While the brokerage's outlook is positive, investors may want to monitor certain operational challenges. The company’s working capital requirements have risen significantly. The number of days it takes for the company to convert its investments and short-term assets into cash—referred to as working capital days—has increased from 77.3 days to 195 days. A higher number often means that more cash is tied up in day-to-day operations, which can impact financial flexibility if not managed effectively over the long term.
Moving forward, the key for investors will be how well the company balances its expansion efforts with the need to keep its cash flow and working capital in check. While the brokerage projects robust growth, the company's financial health will depend on the sustainability of the aligner business and the ability of the management team to efficiently manage its cash resources.