Precision engineering solutions company MTAR Technologies doubled investors' money on its market debut on March 15. Investors can go for partial profit booking and can hold the remaining shares for the long term, experts said.
The stock rallied Rs 1,154.90 on the National Stock Exchange against the issue price of Rs 575 a share. It opened at Rs 1,050, a 83 percent premium over the issue price, which was largely in line with analysts' expectations.
It was trading at Rs 1,063.9, up 85 percent, at 14.25 hours.
"As so many other IPOs are lined up, we advise that allottees, who want to unblock their funds for applying in other IPOs & have listing gain perspective, can book partial profit on three fourth of their position on listing day," Astha Jain, Senior Research Analyst at Hem Securities told Moneycontrol.
The remaining position can be held for a longer term, as MTAR Technologies is a leading player in the clean energy, nuclear and space and defence, manufacturing critical and differentiated engineered products with a healthy mix of developmental and volume-based production, she said.
"The company's financial performance looks strong with a healthy balance-sheet position. The company has a wide product portfolio along with a marquee customer base and robust order book, which gives strong revenue visibility going forward," she added.
MTAR's revenue grew at a 16 percent CAGR during FY18-FY20, while EBITDA growth was at a 35 percent CAGR and profit at 140 percent CAGR in the same period. EBIITDA margin expanded 714bps to 27.1 percent due to rising export share (higher margin) in the same period.
In the nine months period ended December 2020, revenue, EBITDA and PAT rose by 16 percent, 22 percent and 25 percent, respectively YoY, while EBITDA margin further improved to 29.9 percent.
"The company has negligible debt on its books which post IPO will further reduce to zero. However, it is working capital intensive (around 180 days) and its asset turnover stands at around 0.8x, thus resulting in RoE of around 14 percent (FY20)," Motilal Oswal said.
Its revenue is well diversified—clean energy segment contributed 49 percent to 9MFY21 sales, nuclear 27 percent, space and defence 21 percent and others 3 percent. More than 50 percent of its revenue comes from the export market.
Prashanth Tapse, AVP Research at Mehta Equities, said investors should book 50 percent of the profits on the listing day and keep the rest for further upside in the medium term.
For non-allotted investors interested in buying the stock should better wait and look to accumulate the counter when prices settle down, he said.
Jyoti Roy, DVP-Equity Strategist at Angel Broking, said, "Investors who have been allotted shares could look at booking profits. We would recommend investors to wait for some time and let the stock find its equilibrium level before going in for any fresh purchases, as we believe that there could be some selling pressure, especially in the backdrop of the likely bumper listing for the stock."
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Tapse said they were extremely bullish on the company's business strategy, as it was an established player in India in a sector with strong entry barriers for new players. "We like MTAR's unique Make in India business model, high operating and profit margins compared to its peers, healthy (1.7x FY20) order book and supportive government initiatives to boost manufacturing sector," he said.
MTAR Technologies raised Rs 596.4 crore through the public issue which was subscribed 200.79 times.
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