Dodla Dairy, KIMS: Short-term investors should book profit, say analysts

For those who didn't get the IPO allotment, analysts say the business model, industry outlook, management acumen and valuations of these companies should be kept in mind before investing

After stellar listing gains, it is a good time to partially book profit in stocks of Dodla Dairy, KIMS Hospitals, Shyam Metalics and Energy Limited and Sona BLW Precision Forgings Limited (Sona Comstar) that listed at the bourses recently, advise analysts.

Shares of Dodla Dairy extended their listing gains and surged as much as 48 per cent over the issue price to hit an intra-day high of Rs 634 on the BSE on Monday. The shares debuted at a 28 per cent premium over issue price of Rs 428 and got listed at Rs 550 earlier today.

However, those of KIMS, which debuted at Rs 1,009, a 22 per cent premium over the issue price of Rs 825, erased gains and fell 10 per cent from the day’s high of Rs 1,058 and hit a low of Rs 950 on the BSE.

Last week, two other stocks – Shyam Metalics and Energy Limited and Sona BLW Precision Forgings Limited (Sona Comstar) – debuted at the bourses and exhibited a similar trend. While the former listed at a 24 per cent premium at Rs 380 (issue price Rs 306), it ended flat at Rs 389. However, the latter made a tepid debut with a 4 per cent premium at Rs 302.4 (issue price Rs 291), but extended gains to close at Rs 365.

On Monday, Shyam Metalics witnessed further profit booking, and slipped 3 per cent on the BSE to Rs 377. Sona Comstar, on the other hand, tumbled 7.6 per cent to Rs 337 on the BSE.  

Given the volatility in the players, analysts suggest short-term investors should book profits while those for long haul should focus on fundamentals.

Siji Philip, senior research analyst at Axis Securities, for instance, says that short-term investors, who had applied for an IPO for listing gains, can book profits if the listing debut was strong.

"Some of the listings such as Sona Comstar made a tepid listing debut due to expensive pricing.  However, these can be accumulated if the valuations move into an attractive space," she says.

Meanwhile, for those who didn’t get the IPO allotment, Philip says the business model, industry outlook, management acumen and valuations of these companies should be kept in mind before investing.

Concurring to the view, AK Prabhakar, head of research at IDBI Capital says, each IPO offers a different opportunity but valuations and long-term prospects must be kept in mind.

“Shyam Metalics, I think, is very expensive for a company that doesn’t have a raw material base. Sona Comstar, on the other hand, looks attractive at lower levels from a long-term outlook... Dodla Dairy looks risky as an investment bet as the business commands low margins. As for KIMS, the industry outlook remains robust; therefore, after initial volatility, the stock may give good returns,” he says.

That said, some analysts remain cautious on the stocks given the market exuberance and expensive valuations.

Ambareesh Baliga, an independent market analyst, for instance, advises avoiding fresh buys as he doesn’t see much upside in these stocks in the near-term.

“All the four IPOs were valued at the higher end, when compared with peers. Hence, I would suggest booking profit and even fresh investments should be avoided at current levels,” he says.

As per pre-IPO calculations, analysts valued Shyam Metalics at a trailing twelve month (TTM) EV/EBITDA multiple of 8.6x, which was at premium to the peer average of 6.4x, at the upper price band. For Sona Comstar, analysts opined that the issue was valued at 38-40x of FY23 EPS at the upper end of the price band, which is expensive as compared to other auto component companies.

Dodla Dairy and KIMS, which were valued at 16.5x of FY21 earnings and 32x of FY21 earnings, respectively, however, appeared “reasonable” when compared with peers, they said.

Now, given the 48 per cent rally over issue price in Dodla Dairy, Amarjeet Maurya, AVP-MidCaps at Angel Broking, says there is little room for further upside.

“At current levels, the stock is trading at 23.2x PE (9MFY21 annualised profit) which leaves little room for upside. Hence, we recommend book profits,” he says. 

As regards KIMS, the brokerage says the stock is trading at EV/EBITDA of 21x and P/E of 37x post listing, which is cheaper compared to peers. Therefore, short-term investors should to book profit at Rs 977 (gains of 17.8 per cent) while long-term investors may book partial profit and hold the remaining quantity as the company can perform well in the long run, it said.