CEBBCO IPO - Views

[jatinrshah]

Subscribe to CEBBCO for listing gains: Gupta Equities

"Strong relations & proven track record of product delivery with commercial vehicle manufacturers are the strongest investment rationale for CE&BB. Company demands a P/E multiple of 33.8x on its FY10's post diluted EPS of Rs.3.7 at lower band (Rs.125 per share) and 34.4x on upper band (Rs.127 per share). CE&BB's book value for FY10 post the equity dilution stands at Rs.41. Price to Book Value multiple (x) demanded by CE&BB stands at 7.3x on the lower band and 7.9x on upper band. Valuations seem to be on the higher side for a player in the auto ancillary industry. However, investors can subscribe for listing gains."

[chetan]

Way2Wealth's Recommendation of the IPO,

At the upper end of the price band the issue is available at a multiple of 28x, its FY10 earnings and 34x its fully diluted earnings with a P/BV of 7x – 8x. Without a reasonable doubt, this appears to be expensive. Also, considering the fact that the issue proceeds are mainly for its entry into the railway space, the experience of which the company does not possess, raising concerns on its execution capability. At the same time, the high capital-intensive nature of the railway business and the number of players already in that space raises concern on its financial performance, especially since it is cash flow negative. Its ROCE would face immense pressure given such a scenario. In order to justify, such an expensive issue we would have to see much better earnings going forward.
 
Among the pre-issue transactions, among the promoter group, we saw Jashn Beneficiary Trust & Commerial Auto and among non promoter group New York Life Investment Management India (NYLIMI) offload a part of their stake at Rs 116.6. This issue includes a stake sell of 18.6% by NYLIMI, which we believe is an exit opportunity for the foreign venture capital investor.
 
We recommend an AVOID and suggest investors to view CEBBCO’s earning results going forward before investing into the same.

[komal]

Angel Broking's Views,

CEBBCO is one of the leading designers and manufacturers of vehicle bodies for goods CV in India. The company is also involved in the refurbishment of railway
wagons. It proposes to partially utilise the IPO proceeds to set up a wagon manufacturing unit. CEBBCO’s core business fetches a P/E of 25x on FY2012
estimates at the upper price band. Moreover, to justify the implied market capital of Rs698cr, the company’s wagon manufacturing plant would have to operate at 100% utilization within a year and generate profitability in line with existing players, which we believe at the current juncture appears stretched. Hence, we recommend Avoid to the IPO.

[komal]

HSBC Recommends a AVOID with the following short note,

The shares of the companies are offered at Rs 125- 127, discounting its FY10 EPS by 26.4x and 27x  which is expensive compared with auto ancillary as well as railway component and wagon manufacturing business. Considering the expensive valuation, we recommend Avoid. However, considering the future growth prospects one can take exposure at comparatively lower price post listing.