Here are the various research reports on the IPO of Tejas Network.
Amod Joshi of SPA Capital said,
Tejas is likely to report EPS of 12.56 in FY19E (assuming PAT grows 30% in next 2 years). At the upper end of the price band, the stock is available at P/E of 20.5x based on FY19E earnings, which is reasonable considering immense growth potential in India (<20% cell towers are connected on fibre vs 70-80% developed countries) and leadership position in India. We recommend SUBSCRIBE to the issue with long term perspective.
Prabudas Liladhar has the following recommendation,
We believe that Tejas Networks could have benefited from PSU contracts which are visible in the strong growth from revenues from PSU clients. We note revenues from PSU clients grew by 80% CAGR over FY15-FY17 and was the key driver for incremental revenues. Revenues from Private customers in India grew by only 20% CAGR over FY15-FY17 despite huge build-outs from Private Telco. Revenues from International clients has grown at 45.6% CAGR over FY15-FY17. Major International clients include Ciena and Sacofa. At Rs257/sh, the company is being valued at 24x FY17 Adjusted EPS and 15x FY19E EPS (Based on our assumptions). We would Avoid the issue.
SMC has given a rating of 2.5 / 5.0
ICICI Direct's Bhupendra Tiwary and Sneha Agarwal said,
Tejas' operating revenues and EBITDA has grown at a 24.2% and 40.9% CAGR respectively over FY13-17 to | 878.2 crore and | 174.2 crore respectively. Given the sharp growth in topline, the company has benefited from the operating leverage and the margins have expanded from 12% in FY13 to 19.8% in FY17. At the IPO price band of | 250-257, the stock is available at a multiple of 35.6-36.4x FY17 EPS.
Dalal & Brocha have the following VIEW
We would advise investors to keep the stock in radar to Accumulate on dips post listing. Currently the issue is Fairly Priced. At the upper price band of Rs. 257 TNL trades at a P/E of 36x its FY17 EPS of Rs 9.4 and 14x EV/EBIDTA and in-terms of P/BV it is at 3.63x.
We would recommend the investors to AVOID the issue.
Motilal Oswal said,
Tejas Networks revenues grew by 51% CAGR over FY15-FY17. This was the phase of network investments by Telco to boost the increased Data consumption of subscribers and government initiatives on Digital India. At Rs257/sh, the company is being valued at 24x FY17 (Pre-issue reported EPS)
Gupta Equities Capital said,
Tejas Networks Ltd stands to gain from operating leverage. At a P/E of 27.34x of FY17 EPS. We believe that it demands a discount to its domestic peers. We assign a Subscribe rating to the IPO.
Jaikishan J Parmar of Angel Broking said,
At the upper end of the price band, the pre-issue P/E works out to be 29.3x its 2017 earnings, 3.7x of FY2017 Book Value. Moreover, the company’s debt free balance sheet post IPO coupled with the government’s push for digital India would support the growth momentum. Thus, we recommend a SUBSCRIBE on the issue.
SSJ Finance Analyst ATISH MATLAWALA said,
Tejas Networks Ltd has reported a CAGR of 24.2% and 40.9% on the sales and Ebitda fronts respectively over FY2013-2016. On its upper band of price of Rs 257, the issue is priced at P/E ratio of 28.8x of its FY2017 EPS of Rs 8.9. We believe that the IPO is overpriced leaving little for the investors. Hence, we recommend to Avoid the IPO.
Quant Capital Analyst Saurabh Deshpande said,
Majority of the business is from PSUs, so improvement on receivable days might not materialise to a desired extent. It faces steep competition from China’s Huawei which is far bigger. R&D being the DNA, write-offs cannot be ruled out in future.
Given prudent management, healthy customer relationship, cost and capital efficient business model, company has a promising narrative. We recommend subscribe on the IPO.
Centrum Wealth Management has the following Views,
Tejas would be the first listed player in optical networking equipment space and there are no listed comparable peers. At the
higher end of the price band of Rs 257, the issue is valued at 14.1x EV/EBITDA and 24.7x P/E on FY17 (post dilution) basis.
Although not directly comparable, companies in the optical fibre space like Sterlite Technologies are trading at 11.4x EV/EBITDA
& 30.5x P/E on FY17 basis. Given the differentiated business model of the company and relatively short track record of
improving financials (last two years only) it is difficult to take a call on the valuation.
