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Stove Kraft share price climbs 29% on listing day: What should investors do?

"We are cautious about its valuation. Company's brand value, margins and return on capital are lower than its peers," Keshav Lahoti of Angel Broking said.

February 05, 2021 / 12:52 PM IST
 
 
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Stove Kraft share price continued to trade sharply higher from the opening tick rising as much as 28.7 percent to Rs 495.55 on the BSE, backed largely by positive market sentiment on February 5.

In the morning trade, it touched an intraday low of Rs 435.05 but strongly maintained its issue price of Rs 385 per share. At 12:10, the stock traded at Rs 462.35 on the exchange, up 20.09 percent over issue price but down 1 percent from its opening price of Rs 467, with volumes of 7.62 lakh shares.

Experts advised investors, who received shares in the allotment, to book profits given the concerns over sustainability of business growth going ahead due to cut-throat competition in the kitchen appliances segment. But the medium to long term investors can hold alloted shares if they want to, experts feel.

"We advise investors to book profit if stock is available at Rs 450-480 on listing day," Astha Jain, Senior Research Analyst at Hem Securities said.

"Due to small size of issue, stock may be volatile in short term but looking at financial performance, the company seems to be performed well in first half of FY21 as compared to last few years hence if company sustain H1FY21 financial performance then it can continue to perform in long term also," she said.

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Prashanth Tapse, AVP Research at Mehta Equities also advised allotted investors to book profits on the listing day, while considering raising concerns on sustainable business growth going ahead of cut-throat competition in all the segments of kitchen appliance by segment leaders.

Keshav Lahoti, Associate Equity Analyst at Angel Broking, too, advised alloted investors to sell shares on the day of listing provided they are not making any loss on the issue.

"We are cautious about its valuation. Company's brand value, margins and return on capital are lower than its peers. Any increase in raw material prices will have a significant impact on the bottomline. Company also does not have a good track record of profitability. Cost reduced in H1FY21 due to COVID-19 such as travelling, advertisement is going to come back once business comes back to normalcy. So H1FY21 margins are not sustainable. We advise investors to book profit," he reasoned.

He believes there are better options available in the market to invest other than Stove Kraft.

Stove Kraft raised Rs 413 crore via public issue which was comprised a fresh issue of Rs 95 crore and an offer for sale of 318 crore by investors and promoters. The company will utilise fresh issue proceeds for repayment of debts.

"While medium to long term traders may hold their positions for foreseeable future, short term investors may book the listing gains (if any)," Gaurav Garg, Head of Research at CapitalVia Global Research said.

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.
Sunil Shankar Matkar
first published: Feb 5, 2021 12:52 pm

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