IRCON International has order book of Rs 22,407 crore as of March 2018, which is 5.6 times of FY18 revenue which also gives good revenue visibility for the company.
State-owned railways engineering and construction firm Ircon International is set to debut on bourses on September 28 after good subscription to its public issue.
The Rs 466-crore initial public offer was subscribed 9.9 times during September 17-19, 2018. The issue price is fixed at higher end of price band of Rs 470-475 per share.
The portion set aside for qualified institutional buyers (QIBs) was subscribed 12.29 times, non-institutional investors 4.92 times and retail investors 10.07 times.
The public issue comprised a offer for sale of 99,05,157 equity shares by the government.
IRCON is the second CPSE to launch an IPO in the current fiscal, besides being the second railway PSU to be listed on the stock markets after RITES in June this year.
The good subscription given its strong financials, healthy orderbook which provides strong revenue visibility etc suggested that the listing price could be at 5-15 percent premium over final IPO price, but current market conditions could have some impact on the listing.
"Looking at the healthy subscription levels on the last day of IPO and current markets scenario the listing should be in the range of 5 percent (Rs 500)-10 percent (Rs 522) in best case," Prashanth Tapse, AVP Research, Mehta Equities said.
Rajnath Yadav, Research Analyst, Choice Broking said the company is good and available at attractive valuations. "Listing price could be impacted due to current market conditions, but if that would not have been there then the listing would have been strong on Friday."
Due to volatile market conditions, Astha Jain, Senior Research Analyst at Hem Securities also said she is expecting flat/at par listing to this issue, and Girija Ray, Research Analyst at SAP Securities is not positive on listing gain.
Talking about listing day and long-term strategy, two analysts advised holding the stock for long term or better to keep in a portfolio (instead of selling on listing day) as it would provide strong returns over a period of 3-5 years perspective.
"We are positive on the stock considering strong financials, order book etc. IRCON is a classic case where investors should see it from 4-5 year holding period, rather than only from the listing perspective. Considering current market condition, we expect the stock to be a good long term bet," Mrinalini Chetty Desai, Research Analyst (Wealth), Centrum Broking said.
Girija Ray, Research Analyst at SPA Securities also said he is optimistic for a long term investment backed by strong order book, Healthy balance sheet, experience and confident management with less market competitor.
Mrinalini believes the company will provide lot of opportunities going ahead given the government's consistent focus on metro projects, Bharatmala, etc.
IRCON has an order book of Rs 22,407 crore as of March 2018, which is 5.6 times of FY18 revenue which also gives good revenue visibility for the company.
One should hold it as the stock looks good and 10.99 PE of FY18 is fairly good, she advised.
Its international business contributed 15 percent to total revenue in FY18. The company is also looking at orders worth more than Rs 500 crore ticket size.
Rajnath Yadav, Research Analyst, Choice Broking said investors should keep it for a considerable time of one year. "On conservative side, he expects 25-30 percent return in next one year due to strong fundamentals."
But Prashanth Tapse, AVP Research, Mehta Equities advised allotted investors to book profits on the listing day considering risk appetite of investors in the current markets scenario.
"On valuation parse, post-IPO, IRCON is expecting a market cap Rs 4,467 crore at higher price band, valued at 1.24x the book value and the stock is available at PE 11.28x FY18 EPS, which appears to be low on valuations, but with no direct peer comparison and being a government entity with stable business outlook, valuations doesn't stand attractive. Hence profit booking would be best action on listing day," he reasoned.
For long term prospective, he believes with visible outlook and healthy order book position of 5x on FY18 number, Ircon would give 20 percent plus return on investment in next one year (target range Rs 550-570).Astha Jain said if time horizon is one year then one can hold the stock.