Solapur based, Precision Camshafts (PCL), one of the world's leading manufacturer and supplier of camshafts has come out with initial public offer (IPO) to raise funds in the range of Rs 4.05 billion to Rs 4.10 billion to fund its expansion plans. The issue opens on January 27 and closes on January 29. The offer consists of fresh issue aggregating up to Rs 2400 million and an offer for sale of up to 9,150,000 shares, of face value Rs 10 each.
Brokerage firms Reliance Securities, Ajcon Global Services and SMC Global Securities have recommended 'Subscribe' to IPO of Precision Camshaft.
Commenting on the investment rationale, Reliance Securities, said, ''Though the stock is not available at markdown valuation, it is not too expensive, considering its growth plan, high margin and niche segment. At its upper band, the stock would be offered at 19x FY17E (factoring 21% earnings CAGR over FY15-17E). Given high margin, niche product, strong client relationship with respectable domain expertise, high exposure in the export markets, strong management bandwidth and inorganic growth opportunity, the business fundamentals of the company appears lucrative. We suggest Subscribe from a long term perspective.''
Meanwhile, Ajcon Global Services, said, ''Geographically diverse business has reported revenue CAGR of 18.16% and net profit CAGR of 37.09% through FY11-FY15. Sales realization per camshaft has also improved from Rs. 375.26 in FY11 to Rs. 489.28 in H1FY16. At the upper end of the price band of Rs. 186, the IPO is valued at 28x FY15 post issue EPS. With due consideration to factors like a) leading supplier of camshafts for passenger vehicle engines in India and globally, b) state-of-the-art manufacturing facilities, technology innovation and engineering expertise, c)long term relationships with marquee global OEMs, d) strong competitive entry barriers in camshafts business, e) strong orderbook from Ford Motors, f) decent past financial performance, g) positive cash flow from operations over last four years, we believe the premium valuations are justified and recommend investors to Subscribe the issue.''
On the other hand, SMC Global Securities, said, ''Considering the P/E valuation on the upper end of the price band of Rs 186, the stock is priced at pre issue P/E of 22.32x on its FY15 EPS of 8.33. Post issue, the stock is priced at a P/E of 25.84 x on its EPS of 7.20. Looking at the P/B ratio at 186 the stock is priced at P/B ratio of 5.65x on the pre issue book value of 32.89 and on the post issue book value of 57.34 the P/B comes out to 3.24x. Long term investors may Subscribe to the issue.''
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