scorecardresearchCyient DLM surges another 20% after a stellar listing; what should you

Cyient DLM surges another 20% after a stellar listing; what should you do with the stock now?

Updated: 11 Jul 2023, 12:39 PM IST
TL;DR.

Cyient DLM, which made its debut yesterday, July 10, 2023, extended gains for the second straight session on Tuesday on the back of overall positive market sentiment.

The stock listed at  <span class='webrupee'>₹</span>403, a premium of 52 percent or  <span class='webrupee'>₹</span>138 versus its issue price of  <span class='webrupee'>₹</span>265.

The stock listed at 403, a premium of 52 percent or 138 versus its issue price of 265.

Cyient DLM, which made its debut yesterday, July 10, 2023, extended gains for the second straight session on Tuesday (July 11) on the back of overall positive market sentiment as well as strong growth prospects of the stock.

The stock listed at 403, a premium of 52 percent or 138 versus its issue price of 265. It further rose to end the day at 420.75, a 64.3 percent premium to its IPO price.

In today's deals as well, Cyient DLM shares surged as much as 20 percent to its new high of 504.90. Just in 2 sessions, the stock has given over 97 percent returns to its IPO investors.

The initial public offering (IPO) of the firm saw a strong response from investors and was subscribed 71.35 times in the 3 days of bidding (June 27-30). The issue received bids for 89.73 crore shares as compared to 2.23 crore shares on the offer.

The 592 crore IPO of Cyient DLM, a subsidiary of Cyient, has a price band of 250-265. The issue was a full fresh issue of 2.23 crore shares. Post the IPO, Cyient DLM promoter Cyient will hold a 66.68 percent stake in the firm.

What should you do with the stock now?

Vinit Bolinjkar, Head of Research - Ventura Securities, believes that the integration of the promoter's design capabilities and expertise in Cyient DLM enables the company to work with clients right from the conceptualisation stage of their projects. Cyient DLM's solution suite includes a wide range of services such as PCB design and assembly, cable assembly and wire harnesses manufacturing, sheet metal fabrication and machining, plastic injection molding, magnetics, and electro-mechanical integration, he noted.

Bolinjkar further pointed out that Cyient DLM is one of the few EMS companies in India offering electronic solutions for safety and mission-critical applications in highly regulated industries which acts as a significant entry barrier for a new entrant.

The company has a robust and industry-leading order book-to-sales ratio of 2.9x, which provides for visibility of accelerated growth in coming years, added the expert. Cyient DLM is being offered at 105x FY23 P/E and one should buy the stock keeping a small stop-loss of 400, he suggested.

Meanwhile, Nirav Karkera, Head of Research at Fisdom, said that the company operates in a highly promising segment and reflects attractive growth prospects. The company's financial profile is also healthy to a great extent.

Fundamentally, the company is well-positioned to gain from the opportunity. Short-term investors could look to book profits partially while longer-term investors would benefit from waiting till the stock price finds strong support beyond the listing buzz, he advised.

Also, Anubhuti Mishra, Equity Research Analyst at Swastika Investmart, noted that as expected, Cyient DLM made an outstanding entry in the secondary market at a listing price of Rs. 403. The issue price of the IPO at the upper band was 265; hence, it listed at a premium of 52 percent.

"Cyient DLM is a fundamentally strong company, has a strong track record of growth, and is well-positioned to benefit from the growing demand for digital manufacturing solutions. We will not recommend a fresh Buy at this level. However, existing investors can hold the shares for the long term with a stop loss at 362.7, as the company has good growth prospects," Mishra said.

Incorporated in 1993, Cyient DLM is an integrated electronic manufacturing service (EMS) and solutions provider with a focus on the entire life cycle of a product, including design, build, and maintenance. It has over 22 years of experience in developing high-mix, low-to-medium volume highly complex systems. It is a qualified supplier to global OEMs in the aerospace and defence, medical technology and industrial sectors.

The company enjoys long-term relationships with marquee customers such as Honeywell, Thales Global Services, ABB, Bharat Electronics and Molbio Diagnostics, having had an average relationship of over 11 years.

Cyient DLM's revenue has increased from 628 crore in FY21 to 832 crore in FY23 at a CAGR of 15 percent. Meanwhile, the net profit of the company has risen at a 64 percent CAGR from 11.8 crore in FY21 to 31.7 crore in FY23.

 

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First Published: 11 Jul 2023, 12:39 PM IST