Apollo Micro Systems IPO off to a steady start: Brokerages say subscribe for these long-term gains

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Published: January 10, 2018 12:08:47 PM

Apollo Micro Systems IPO to raise up to Rs 156 crore opened for subscription today, was subscribed by 16% this morning, on steady demand from retail investors. Most of the brokerages have a subscribe rating on the issue given long-term potential of the company.

smes ipo, sme iposApollo Micro Syetems IPO received bids for 2,93,750 shares as against the total issue size of 41,44,955 shares, implying a subscription of 16%. (Image: Reuters)

Apollo Micro Systems IPO to raise up to Rs 156 crore opened for subscription today, was subscribed by 16% this morning, on steady demand from retail investors. The issue received bids for 2,93,750 shares as against the total issue size of 41,44,955 shares, implying demand to the tune of 16%. The company has set a price band of Rs 270-275 for the issue, and looks to raise upto Rs 156 crore at the higher end of the band. The company looks to sell 56,72,727 equity shares (of which Employee reservation of upto 20,000 eq sh), in a fresh issue. Apollo Micro Systems will offer a Rs 12 discount to employees and retail investors. The issue will remain open for subscription from 10th January to 12th January 2018. The lot size is fixed at 50 shares and in multiples of 50 shares thereafter.  The company will dilute 27.4% (at upper price band) of its post-offer paid-up equity share capital. Most of the brokerages have a subscribe rating on the issue given long-term potential of the company. We take a look at why brokerages are bullish on the prospects of Apollo Micro Systems IPO.

Angel Broking

Angel Broking sees a lot of opportunity in the defense industry going forward. The defence electronics manufacturing sector is expected to create a Rs 4 trillion worth market opportunity over FY16-FY26E, notes the firm. “In terms of valuations, the pre-issue P/E works out to 29x 1HFY2018 annualized earnings (at the upper end of the issue price band), which is lower compared to its peers like Astra Microwave (trading at 36.2x its 1HFY2018 annualized earnings). Further, AMSL has strong financial record and return ratios compared to Astra Microwave. Hence, considering the above positive factors, growth in the defence industry we recommend SUBSCRIBE on the issue,” Angel Broking said.

HDFC Securities

Pointing to the strengths of the company, HDFC Securities says that the company has a proven track record in developing new technological systems and order execution; recurring orders from existing programs; strong R&D capabilities; qualified and experienced workforce & senior management. Notably, the company has registered strong numbers both on the top-line and bottom-line fronts CAGR of ~43% and ~52% respectively over FY2014-17, backed by healthy growth in order book and improvement in margin.

SSJ Finance

SSJ Finance says that there is room for upside in the Apollo Micro Systems IPO. “AMSL has reported a CAGR of 54.2% and 58.3% on revenue and net profit fronts respectively over FY2013-2017. On its upper band of price of Rs 275, the issue is priced at PE ratio of 27.1x of its H1FY2018 annualised EPS of Rs 10.2. We believe that the IPO is fairly priced leaving a room for upside. Hence, we recommend to Subscribe the IPO,” noted the firm.

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