Flexituff Intl IPO looks slightly overpriced: SMC

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Flexituff Intl IPO looks slightly overpriced: SMC

Flexituff International, a leading integrated manufacturer of Flexible Intermediate Bulk Containers (FIBC) is entering the Indian capital markets with its initial public offer (IPO) for 67.5 lakh equity shares including offer for sale of up to 22.5 lakh equity shares by Clearwater Capital Partners (Cyprus) Limited of face value of Rs 10/- each.

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Flexituff International , a leading integrated manufacturer of Flexible Intermediate Bulk Containers (FIBC) is entering the Indian capital markets with its initial public offer (IPO) for 67.5 lakh equity shares including offer for sale of up to 22.5 lakh equity shares by Clearwater Capital Partners (Cyprus) Limited of face value of Rs 10/- each. Acording to SMC Research the issue seems to be slightly overpriced compared to its listed peers and investors with a long term horizon may only consider the issue.

The company currently manufactures FIBC, geo-textile fabric and ground cover, reverse printed BOPP woven bags, special PP bags including leno bags. These products are manufactured at the three manufacturing units located in Pithampur (MP) and Kashipur (Uttrakhand).

Valuation

Considering the P/E valuation on the upper end of the price band of Rs 155, the stock is priced at pre issue P/E of 7.91x on its FY11 EPS of Rs 19.60. Post issue, the stock discounts its FY11 EPS of Rs 15.54 by 9.98x. Looking on to P/B ratio at Rs 155, the stock is priced at P/B ratio of 1.64x on the pre issue book value of  Rs 94.67 and on the post issue book value of Rs 123.24, the P/B comes to 1.26x. On the lower end of the price band of Rs 145, the stock is priced at pre issue P/E of 7.40x on its FY11 EPS of Rs 19.60. Post issue, the stock discounts its FY11 EPS of Rs 15.54 by 9.33x. Looking on to P/B ratio at  Rs 145, the stock is priced at P/B ratio of 1.53x on the pre issue book value of Rs 94.67 and on the post issue book value of Rs 123.24, the P/B comes to 1.18x.

Outlook

The company has growing operations, increased product portfolio and application of its products in various industries, established track record in export markets high capacity utilization levels of its integrated manufacturing facilities going in its favour. However, the products are commoditized in nature and the company has no pricing power. The volatile raw material prices and dependence on few suppliers for raw material are the other major concerns for the company. The MAT incidence on the SEZ operations is going to hit the margins further. On a post-issue P/E multiple of 10x, the issue seems to be slightly overpriced compared to its listed peers and investors with a long term horizon may only consider the issue.

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