Azad Engineering delivers 37% listing gains: Time to book profit, hold, or buy more stocks?

All analysts envision robust growth potential for the company

Shares of Sachin Tendulkar-backed Azad Engineering made investors happy on December 28 with a 37 percent return on listing.

As of 1:18pm, the aerospace components and turbines manufacturer was trading at Rs 706, up 35 percent from its issue price of Rs 524 on the National Stock Exchange.

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As the market surged to fresh highs during the day, what tickles the investors is a simple question: Is it time to book some profit by selling the shares, or hold them, if not buying more, for higher returns later. Let's see how analysts are judging the debutant.

"Azad Engineering's successful listing signifies its strong fundamentals and growth potential. For investors seeking exposure to the manufacturing sector with high growth potential, the company offers a compelling opportunity, and existing investors in the IPO may consider holding their shares," Shivani Nyati, head of wealth at Swastika Investmart, said. "A cautious approach is advised due to the full valuation and potential risks, and thus a stop loss of around 650 is recommended."

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Prashanth Tapse, a research analyst at Mehta Equities, is of the view that listing premium is justified as Azad’s mission and life-critical components product profile create a high entry barrier which requires a long and rigorous approval process for any competitor.

"In the long run, we see a lot of growth opportunities come through the expansion plan and gaining market share globally from 1 percent to multifold due to larger wallet share contributions from long-standing clientele like Mitsubishi Heavy, General Electric, Honeywell International, Siemens Energy and many more," Tapse added.

Considering all the parameters, Mehta Equities recommends allotted investors to hold for the long term. Non-allottees one can wait for any dips after listing to accumulate the stock and look to hold for a period of 3-5 years.

"Azad Engineering is on the cusp of a strong growth as it has met the necessary client quality qualification of over 15 years. Also, increased revenue contribution from its existing clients, coupled with expanding its customer base, will augment growth," Onkar Kelji of Indsec Securities said.

The company will spend Rs 60.4 crore from the fresh issue proceeds on buying plant and machinery, and repay debts amounting to Rs 138.19 crore. Its borrowings stood at Rs 154.2 crore as of September 2023. The remaining amount will be used for general corporate purposes.

The Rs 740-crore issue had a combination of fresh shares of Rs 240 crore by the company and an offer-for-sale of shares worth Rs 500 crore by existing shareholders.

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