Nine brokerages recommend subscribing to the initial public offering (IPO) of engineering systems and solutions provider Uniparts India. The IPO opened for public subscription on November 30 and will close on December 2.
The public issue is entirely an offer for sale (OFS) of 14,481,942 equity shares of ₹10, aggregating up to ₹836 crore. The lot size of this IPO is 25 shares which means investors can apply for a minimum of 25 shares and after that, in multiples of 25 shares.
Half of the OFS is reserved for qualified institutional buyers (QIBs) while 15 percent is for high-net-worth individuals (non-institutional investors), and the remaining 35 percent is reserved for retail investors.
Brokerages have a ‘subscribe’ rating on the back of the company's sound financial position, strong global presence, leadership position in the supply of systems and components, expanding opportunities in the markets for precision machined parts (PMP) and 3-point linkage systems (3PL), and fair valuation.
"The company has leading market presence in global off-highway vehicle systems and components segment. Also, it is available at reasonable valuation as compared to its peers," said brokerage house Marwadi Financial Services.
Similarly, Anand Rathi Share and Stock Brokers Ltd too believes the valuations are reasonable. "The company intends to expand into newer geographies, adjacent product verticals, acquire additional customer accounts and increase wallet share of existing customers. It also plans to grow inorganically through strategic acquisitions and alliances. When compared to its listed peers, the issue appears to be reasonably priced," said the brokerage. It recommends subscribing for a long term.
Brokerage ICICI Direct Research also believes the valuations are inexpensive. "We assign 'subscribe' rating on the issue, amidst healthy financials, precision component product profile and inexpensive valuations," said the brokerage.
Motilal Oswal Financial Services Ltd believes that the New-Delhi-based company is well placed to capture the growing industry opportunity in tractor and construction equipment space.
According to the brokerage, the IPO is priced at 15.6x FY22 P/E which is reasonable compared to its robust financials. Futher, given the huge capex plans of government in India and US, it is bullish on the issue.
Reliance Securities Ltd foresees demand for PMP products in FY21-26E to grow at a decent CAGR of 6 percent and 8 percent led by strong volume growth in construction equipment production in key markets such as Japan and Europe.
"Increasing mechanisation in the agriculture and CFM sectors would enable the company to efficiently serve Original Equipment Manufacturers (OEM) across multiple global locations, and to rationalise their supply chain and asset/working capital management," added Reliance Securities.
The company's substantial backward and forward integration, according to Sushil Finance Consultants Ltd, lessens reliance on outside supply and support services and enables preservation of the quality controls necessary to service international OEMs and aftermarket players.
"Stable financial performance with increasing margins in last three fiscals, and bright future prospects, investors can invest with long term horizon, "added the brokerage.
Further, Ventura Securities Ltd expects revenue/EBITDA/PAT to grow at a CAGR of 12.5 percent/12.0 percent/13.5 percent to ₹1,747 crore/ ₹377 crore/ ₹247 crore, respectively, due to the global economy's gradual recovery, rising infrastructure spending in the US, increase in farm income due to inflation in agricultural commodities, and shift in manufacturing from the US/Europe/China to India.
"Considering the growth opportunities in the global OHVs and strong fundamentals of the company, we recommend a 'subscribe' rating with a price target of 711 rupees, which represents an upside of 23.2 percent over the IPO price in 18 months," added the brokerage.
Due to the company's market-leading position in its sector, experienced management with a strong track record, and the lack of a shoulder-to-shoulder competition in India at this time, Jainam Broking Ltd advises a medium term hold on the stock.
Similarly, considering the company's strong earnings growth, improving margins and positive industry outlook, Geojit Financial Services Ltd assigns a 'subscribe' rating on a short to medium term basis.
Axis Capital, DAM Capital Advisors and JM Financial are the book-running lead managers to the issue.