Prince Pipes and Fittings share price recovered from day's low, but still traded lower than the issue price, after management clarification on several topics like litigation with Montana Developers, personal guarantee for high working capital & term loan, repayment of the outstanding bonds issued by Express Infra Projects LLP.
The stock opened with 10 percent discount at Rs 160 against issue price of Rs 178 and immediately hit an intraday low of Rs 152.50 on the National Stock Exchange. But it recovered from that low point of the day and hit a day's high of Rs 177.90.
At the time of publishing this copy, it was trading at Rs 167.70, down 5.78 percent from the issue price.
Experts are mixed in their opinion as some are saying one can book profits and avoid even though the management clarified, but others expect value in the stock in coming quarters.
"By taking cues from low subscription levels against markets expectation allotted investors should try book profits on the listing day," Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
"One can wait and watch for a few quarters and analyse the post listing financial performance before investing for the long term. Investors can look for buying if Prince Pipes gets settled below Rs 140 levels which can be a comfortable zone to accumulate," he said.
Tapse feels Prince Pipes, the 6th largest pipe player in the industry with largest SKUs of fittings, is well placed to capitalise the growth opportunities in India in infra, higher irrigation spending and real estate sector with replacement business of old fittings. Industry outlook remains optimistic, he said.
Santosh Meena, Senior Analyst, TradingBells said the stock looked attractive by its valuation but there was a question mark on its corporate governance.
"There are concerns regarding related party transactions and pledging of promoter's shares. Investors are advised to avoid this stock and look for other quality stocks in the same space," he added.
As per the latest update, management clarified on release all their pledging of shares (currently 35 percent to zero) by December 31, 2019, and also, the money received via fresh issue proceeds would be utilized to repay the debt.
"As a result, going ahead, PAT margins would increase due to reduction in interest cost. Therefore, investors may buy at current levels of Rs 170-172 (as per our listing expectations) and investors who receives allotment of shares are advised to hold at least 15 days," Manali Bhatia of Rudra Shares and Stock Brokers said.
"The stock is fairly priced & is available at a discounted P/E ratio in comparison to peers. Also, provided the management promise to do as stated, we believe the stock could go to the levels of Rs 230-250 in next one year," she added.
Nihar Chheda, Associate VP-Corporate Strategy at Prince Pipes, expects the company to grow 12-15 percent in value and volume in next 24 months.
"We have been able to grow despite a slowdown in real estate space. We plan to grow 5 percent faster than the industry. Building material space is not doing well but piping and related sector doing well," he said.
Prince Pipes had a 19.5 percent revenue growth in FY19 at Rs 1,572 crore and 13.7 percent profit growth at Rs 83 crore against FY18.
Company has a market share of 5 percent against peers Supreme Industries (11 percent), Finolex Industries (9 percent) and Astral Poly (7 percent).
In terms of valuations on the basis of FY21 expected earnings, the company is available at discount to its peers. Its price-to-earnings ratio stood at 23.5 against peers Astral Poly (71.4) and Supreme Industries (31.6).Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.