The IPO of
Sharda Cropchem will open on September 5, 2014 and will raise Rs 352 Crore. Here are the Various Brokerage / Research Recommendations.
35% of the issue is Reserved for Retail Indian Investors
Sharekhan has the following recommendation,
At the upper price band of Rs156, the company is priced at a price/earnings (PE) ratio of 13x the upper price band of Rs156 and 12x the lower price band of Rs145 on FY2014 earnings. This seems reasonable, given the company’s strong balance sheet, healthy return ratios and earnings growth. Also, the offer price is at a discount to the comparable agrochemical companies (for whom the average PE ratio is around 25x FY2014 earnings). Further, the company’s asset-light business model and focus on registration of the molecules make its business strategy unique as compared with its peers (that have a capital-intensive business model).
Dolat Capital Analysts Amit Khurana and Afshan Sayyad have the following views,
The price band for the issue is of Rs 145-156/share which translates to a market cap of Rs 13-14 bn. On an upper price band the stock is valued at a P/E multiple of 13.2 times FY14 EPS of ` 11.8. There is no direct comparable of the company in the listed space as SCL has an asset light model, unlike other listed agrochemical companies which are more capital intensive in nature
IIFL Analysts have the following View
But with the stiff competition from specialty product manufacturers, generic players like SCL may not be able to reap full benefits. We are not so enthusiastic about the business model of the company and recommend investors to subscribe only for listing gains.
Emkay Analysts Rohan Gupta and Chetan Thacker have the following recommendation to retail investors,
The issue price of Rs 145-156 is priced at 12x-13x FY14 EPS which works out at ~50% discount to its peers. We believe that the issue is attractively priced and expect the stock to trade at 16-17x FY14 EPS which provides an upside of 30-40%, ascribe a Subscribe rating.
S.P. Tulsian has the following view,
Sharda Cropchem lacks financial strength, while fundamentals do not warrant a subscription. Not being swayed by sentiments and market operations, we advise to avoid the issue! Avoid looking at the attractive grey market premium, coupled with frenzy created by the vested interest for the IPO.
ICICI Analysts Chirag J Shah and Shashank Kanodia said,
At the upper price band of | 156, the company is available at a P/E of 13.2x on FY14 EPS. We reiterate that this issue is essentially an offer for sale wherein no proceeds from the issue will be ploughed back in the company. We recommend SUBSCRIBE on the issue for listing gains.
India Nivesh Analysts Daljeet S. Kohli and Amar Mourya said,
In absence of any direct competitors, we have considered companies such as UPL, Nufarm and Syngeta Ag, which operates through third-part vendors or outsource its manufacturing to low cost destinations. Considering the industry avg. growth rate of 10%/12% in FY15-16E and maintaining the FY14A EBITDA and PAT margin the stock looks attractive relative to the industry avg EV/EBITDA multiple. We recommend investors to SUBSCRIBE for the IPO.
