Market experts say CMP expensive; advice to book profit
Shares of MTAR Technologies, a precision engineering solutions company, made a strong debut on the bourses, listing at Rs 1,063.90, up 85 per cent against its issue price of Rs 575 per share on the BSE on Monday. On the NSE (National Stock Exchange), the stock opened at Rs 1,050, up 83 per cent against its issue price.
Post listing, the stock zoomed 93 per cent, hitting a high of Rs 1,110 on the BSE and Rs 1,100 on the NSE. At the close of trading hours, the stock closed at Rs 1,078.30 on NSE, a gain of 87.47 per cent while on BSE it closed at Rs 1,082.25, a gain of 88.21 per cent.
In comparison, the S&P BSE Sensex and Nifty50 index closed in red with a loss of 0.67 per cent, each. The MTAR counter clocked trading volume of 1.50 crore shares on NSE.
Market experts are of the opinion that the current valuation of the company has priced in all its future expectation-based gains. Investors who were lucky to get allotment in the highly oversubscribed IPO, should book profit at current level as they will get the opportunity to buy the same at lower levels in coming weeks and months.
Jyoti Roy, DVP, Equity Strategist, Angel Broking said, “At CMP of Rs 1,115, the stock is trading at P/E multiples of 95.3xFY20 EPS which is expensive and captures near term growth potential thus leaving very little upside from current levels. Hence we would recommend book profits at current levels.”
The MTAR IPO was of a small size of Rs 597-crore and was subscribed more than 200 times on overwhelming support from investors. The portion reserved for retail investors was subscribed 28.4 times, QIB (Qualified Institutional Buyer) category was subscribed 165 times and non-institutional category received 650.79 times subscription.
The Hyderabad-based company has precision engineering capabilities to build nuclear and pressurised water reactors, aerospace engines, missile systems, aircraft components and many such other critical components and assemblies. Proceeds from the fresh issue will be used to repay debt, fund long-term working capital requirements besides attending to general corporate purpose.
The company’s customers include some of India’s leading organisations in the nuclear, and space and defence sectors such as the NPCIL, ISRO, and the DRDO, among others. In addition, the company also supplies its products to international companies such as Bloom Energy and an Israeli defence technology company, among others.
“India has 22 operational nuclear reactors with a capacity of 6.3 GW. The country plans to double its nuclear capacity to 11.5 GW. Hence, seven new reactors are expected to come into operation in the next five years. This will create a huge opportunity for MTAR in the large refurbishment and maintenance market that is also expected to increase 1.6x,” ICICI Securities said in IPO note.
The recent ban on 101 defence-based items, thrust towards indigenisation and policy initiatives towards making India an export hub for defence products will further widen the scope and addressable opportunity for MTAR, the IPO note added.