Aeroflex Industries sees selling pressure after bumper listing; here’s what analysts say

Despite expensive valuations at the higher end, the offer got stellar demand for its unique eco-friendly product which is said to be an alternative to rubber based hoses and business demand for both international and domestic markets which justifies the premium listing.

The stock was valued at a PE multiple of 46.3x based on its FY23 earnings at the upper price band on post-issue capital.

Analysts said due to the company being from a new segment it has no immediate peers to compare and hence the issue fetched demand on first mover advantage. This also helped the company get hefty premium at debut.

“Looking at subdued secondary market mood we recommend allotted investors to book profits on the listing day and those who look to buy on listing day to have a wait and watch approach before buying in the debut price,” said Prashanth Tapse, Sr VP Research, Mehta Equities.

The company's initial public offering received significant investor interest from both institutional and retail segments. The Rs 351-crore public issue was subscribed 97.11 times during August 22-24. Qualified institutional buyers have bought 194.73 times the reserved portion, followed by high networth individuals which have bid 126.13 times the allotted quota and retail investors 34.41 times.

The company’s revenue from operations during FY21-23 grew at a CAGR of 36 percent, while EBITDA (earnings before interest, tax, depreciation and amortisation) and profit increased at a CAGR of 56 percent and 126 percent respectively during the same period. It also scaled its operational margins to 20.1 percent in FY23 compared to 15.4 percent in FY21 and its debt-to-equity ratio has improved to 0.39x in FY23, from 0.9x in FY22.

The company manufactures environment-friendly metallic flexible flow solution products like multiple variety of hoses, tubes and hose assemblies. The company’s clientele includes distributors, fabricators, maintenance repair and operations companies (MROs), original equipment manufacturers (OEMs), and companies operating in a wide range of industries. Moreover, the company has recently forayed into manufacturing products made of bronze. It has an export-oriented business model, and it generates around 80 percent of its revenue from exports alone.

“Aeroflex's future strategies look promising. The company plans to expand its global and domestic businesses, and it is investing in new technologies to improve its products. We believe that these strategies have the potential to drive long-term growth and profitability for the company,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart.

He added that allottees who applied for the public offering for listing premium are advised to maintain their stop loss at Rs 170 and wait for further upside, whereas those who have a medium- to long-term perspective can also hold the stock.

Sunil Shankar Matkar also contributed to this story.

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