SBFC Finance Limited
03-Aug-23SBFC is a proxy play on secured business loans to self-employed individuals which is one of the fastest growing segments in lending. SFBC has grown its AUM at a CAGR of 46% over FY21-23, one of the fastest amongst listed financials. With a loan book of just Rs. 4415 Cr as on FY23, the runway for accelerated growth is huge. Owing to SBFC’s focus on low ticket size (Rs. 10 Lacs in MSME) and self-employed segment; its business is a difficult one to establish and execute, especially with regards to the underwriting capabilities for this segment which acts as durable competitive advantage and thus SBFC faces low competition. SBFC is being offered at a discount to listed comparable peers on P/B basis and thus we recommend ‘Subscribe’ to the issue.
Yatharth Hospitals & Trauma Care Services Ltd.
26-Jul-23Yatharth is one of the largest hospitals in Noida region. No. of occupied beds and ARPOB grew by 13% and 12% CAGR respectively over FY21-23; which led to a 51% CAGR growth in company’s revenue. EBITDA grew at a CAGR of 41% over the aforementioned period. India’s current healthcare expenditure is largely dominated by private expenditure. North India regions including Haryana and Uttar Pradesh have lower than average doctor and nurse density per 10,000 population. This is expected to improve going ahead, favouring company’s expansion plans. Yatharth’s recent acquisition of Jhansi-Orchha is aimed at further expanding into new geographies and to grow their presence into regional healthcare market. Company intends to focus on more advanced specialties; having high demand in respective markets and deliver a higher ARPOB. With high ROE and ROCE of 36% and 24.4% respectively, we believe Yatharth is being offered at a reasonable valuation of 20.9x FY23 EV/EBITDA as compared to its peers. With healthy financials along with growth potentials in Northern India, *we recommend ‘SUBSCRIBE’ to the issue.*
Netweb Technologies India Limited
17-Jul-23Netweb Technologies intends to leverage its presence in the fast growing HCS (High end Computing Solutions) industry with focus on developing refined, customised computing systems to address the high-end computational requirements of customers. Netweb is thus able to generate high EBITDA margins and ROCE. There are no directly comparable peers in the listed space who are present in the HCS industry. Thus we compare Netweb with EMS players who are mainly into manufacturing of electronic components and are also supported by strong growth due to favorable industry tailwinds. We believe, Netweb possesses higher growth and return ratios compared to EMS players and is also available at cheaper valuations. Thus we recommend to Subscribe to the IPO.
Utkarsh Small Finance Bank - IPO Note
11-Jul-23Valuation and Recommendation:
Utkarsh is favorably placed with presence in low ticket segments having strong industry tailwinds. Further, Utkarsh has managed to reduce its exposure to the unsecured micro banking segment from 82% in FY21 to 66% in FY23 which has de-risked its business model. We expect this trend to continue. Over FY21-23 period, Utkarsh has outperformed its peers on all fronts - loan growth, return ratios and asset quality. It’s valuation on P/B basis is at a significant discount compared to peers, at 1.1x FY23 post issue BVPS. Considering that the micro finance industry has come out of severe crisis over 2020-22, with most of the bad loans having weeded out of the system, we expect growth and healthy profitability to resume for the sector as well as for Utkarsh. We recommend subscribing to the issue.
Senco Gold Ltd - IPO Note
04-Jul-23Valuation and Recommendation:
Senco Gold has positioned well in the eastern India and other non-eastern regions with its legacy of last five decades of journey. It has delivered 24% revenue growth over FY21-23 with margin improvement from 6.6% in FY21 to 7.8% in FY23. Although, company’s decent performance in terms of profitability amongst its peers, it has observed challenges generating positive operating cash flow during the last 2 years. Further, debt to equity ratio at 1.2x as on Mar’23 may lead to further contraction in company’s profitability. However, the IPO is issued at 15.5x PE valuation based on its FY23 EPS which is at discount relative to average PE valuation of its peers. Thus, we recommend ‘SUBSCRIBE’ to the issue for listing gains.
Cyient DLM Limited - IPO Note
27-Jun-23Valuation and Recommendation:
Cyient DLM has strong industry tailwinds working in its favour as domestic EMS (electronics manufacturing services) industry is expected to grow at 32% CAGR over FY22-27. Over FY21-23 period, Cyient DLM’s revenue growth is lagging peers at 15% CAGR, however its strong order book provides decent visibility of accelerated growth going forward. It’s valuation on P/E basis is reasonable compared to peers, at 66.2x FY23 earnings, considering the future growth opportunities. We recommend subscribing to the issue from long term perspective.
Idea Forge Technology Limited- IPO Note
26-Jun-23Valuation and Recommendation:
ITL being the pioneer and market leader with 50% market share is ideally positioned to benefit from this huge growth in the drone industry. ITL’s growth and margin are superior to listed defence companies. ITL’s valuation appears reasonably attractive considering its leadership position and future growth opportunities in the niche industry of drones. Thus we recommend to Subscribe to the IPO.
IKIO Lighting Limited
06-Jun-23Ikio Limited is focusing on high end segment of the lighting industry combined with strong backward integration and ODM, it is able to generate substantially higher EBITDA margins and thus ROCE compared to peers. Ikio’s valuation on P/E basis is at a reasonable discount to peers and thus we recommend to Subscribe to the IPO.
Divgi TorqTransfer Systems Ltd. - IPO Note
28-Feb-23DTTS’s edge is its ability to develop and provide system level solutions like transfer case, torque coupler and DCT (dual clutch transmission) solutions backed by in-house software development capability. DTTS intends to leverage its presence in the fast growing UV automatics segment. With OEMs entirely dependent on imports for DCT, DTTS will be the only manufacturer of DCT systems in India. Also recently, DTTS has been awarded a contract for supply of EV transmission systems. Further such wins could propel the company into a higher growth orbit. DTTS is being offered at reasonable valuations at 39.1x FY22 earnings, considering the future growth opportunities. We recommend subscribing to the issue from long term perspective.
FPO Note - Adani Enterprises Ltd
24-Jan-23Valuation and Recommendation
AEL’s leap into futuristic technologies like green hydrogen with heavy investments can propel the company into a new league or it could bleed the financials if the market dynamics shifts in favor of other alternate fuels. AEL’s business model involves high risk with uncertain business outcomes and thus we have a ‘Neutral’ rating on the issue.
Landmark Cars Ltd.
12-Dec-22Valuation and Recommendation:
Upon listing, Landmark will be the only listed player in the business of vehicle retailing. Further there is no other listed player which exclusively caters to the premium/luxury end of the PV market. We observe that Landmark’s business model being asset light, generates higher asset turns and is thus able to deliver superior ROCE. Valuations for Landmark are undemanding at 14.4x FY22 EV/EBITDA considering it being a (i) proxy play on the fast growing premium segment of the domestic PV industry; (ii) leader in the premium vehicle retailing industry and (iii) delivering respectable ROCE. We recommend subscribing to the issue from a long term perspective.
Sula Vineyard Ltd. IPO Note
12-Dec-22Valuation and Recommendation:
Sales de grew at a CAGR of 6.5% over FY21 -22, impacted due to Covid, however, profitability improved over same period. Own brands revenue to wine business has increased to 83.9% in FY22 from 63.6% in FY20 led to improvement in Gross margins to company. Gross margins improved to 72.4% in FY22 vs 53.1% in FY20. H1FY23 sales came at Rs 212.3cr (+44.2% YoY). H2 is seasonally strong for the company due to celebrations, comprising around 60% of the total sales, indicating revenue of FY23, is likely to surpass pre Covid level . H1FY23 Own brands contribution further improved to 85.5% which further improve gross margins to 77%. EBItda margins For H1FY23 improved to 27.9% vs 9.4% in FY20 due to higher gross margins. As of FY 2021, the share of wine as a form of alcohol consumption in India is very low at less than 1 %., against the world average of close to 13.5 %, suggesting significant room for growth with increasing awareness of wine as an alcoholic beverage with benefits. Indian Wine Market size is expected to grow at a CAGR of 20.5 % in terms of value from FY 2022 to FY 25, of this domestic wine is expected to grow at a CAGR of 23.5% over FY 22 -25. Sula Vineyard being the market leader with Continuous focus on growing Own Brands, Focus on premiumization of its product portfolio, Increasing wine awareness and consumption, and penetrating further into Tier-1 and 2 cities in India will be able to capture the rising opportunity in the market Since Wine production starts with the harvesting season in December and continues till April leading to a high inventory business model as compared to other alco-beverages. WC for FY22 stands at 180 days & CFO stands at Rs 87.4 cr . Improving margins improved ROE to 13.2% and ROCE to 14.4% in FY22. With this, at the given upper price band of issue of Rs 357, Sula Vineyard is offered at EV/EBITDA of 28.4x FY22 EBITDA which we feel is attractive. We recommend subscribing to the issue
Uniparts India Ltd. - IPO Note
29-Nov-22Uniparts has demonstrated its scalability and execution with the topline growth at 12% CAGR over FY17-22 and has scaled revenue of Rs. 1227 Cr in FY22. The company has reduced their debt from Rs. 330 cr in FY19 to Rs. 83 cr as of June 2022, which has helped Uniparts to improve its bottom line performance. A global player of engineered systems and components for the off-highway market in the agriculture, CFM and aftermarket, is anticipated to increase its market share from present 8% in higher than 70 HP segment. We believe Uniparts is being offered at reasonable valuations at 15.6x FY22 earnings considering peer valuations and future growth opportunities in the 3-PL and PMP industry. We recommend subscribing to the issue.
Archean Chemical Industries Ltd.
09-Nov-22A leading market position of Archean Chemical Industries Ltd has planned product innovation, and capex to expand existing as well as new manufacturing facilities ensures positive business growth. The company has delivered 36.3% / 77.7% growth in revenue and EBITDA between FY20-22, respectively. The company is expected to utilize its funds for the redemption of NCDs issued by company which will improve its debt to equity ratio up to ~1.0x from 2.6x as on Jun’22. Further, this will have a positive impact on the profitability given the significant reduction in the interest cost of NCDs (with yield to maturity at 17% p.a.). ACIL is valued at a discount based on its P/E of 26.6x, EV/EBITDA of 12.7x compared to its average valuation of peer companies. We recommend ‘SUBSCRIBE to the issue.
Five Star Business Finance Ltd.
09-Nov-22FSBF is a quality proxy play on secured business loans to micro[1]entrepreneurs and self-employed individuals which is one of the fastest growing segments in lending. With focus on ‘Self Occupied Residential Property’ as collateral and proven asset quality track record, the business appears less risky and more rewarding compared to other listed NBFCs/SFBs engaged in segments such as vehicles, unsecured business, unsecured micro loans and wholesale. SFBF has grown its AUM at a CAGR of 50% over FY18-22, one of the fastest amongst listed financials. With a loan book of just Rs. 5,297 Cr as on June 2022, the runway for growth is huge. FSBF is being offered at a discount to closest listed comparable peers and thus we recommend ‘Subscribe from long term perspective’ to the issue.