Bumper listing for Shankara Building: Angel says book profits or stay put for 2-3 years

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April 5, 2017 6:40 PM

Angel Broking has recommended that IPO allottees of Shankara Building Products may book their bumper profits and exit the stock after the company’s stellar listing today at a premium of 21% and the subsequent rally, but has also suggested that the long-term investors looking for more value may hold it for 2-3 years.

Existing retail investors can look to take profits off the table. However, considering its shifting client mix and potential for future margin expansion, serious long-term investors can look at holding on to the stock with a 2-3 years time frame, Angel Broking said.

Angel Broking has recommended that IPO allottees of Shankara Building Products may book their bumper profits and exit the stock after the company’s stellar listing today at a premium of 21% and the subsequent rally, but has also suggested that the long-term investors looking for more value may hold it for 2-3 years.

“Existing retail investors can look to take profits off the table. However, considering its shifting client mix and potential for future margin expansion, serious long-term investors can look at holding on to the stock with a 2-3 years time frame,” Amarjeet Maurya, Senior Equity Research Analyst – Mid Caps, Angel Broking, said in a note today.

Earlier today, the home building products retailer Shankara Building Products got a bumper listing on stock exchanges, with its shares opening on NSE at Rs 555.05, up 20.66%; and on BSE at Rs 545, up 18.5% from the issue price of Rs 460. Soon after, the shares made the day’s high of Rs 629.15 on NSE and Rs 627.6 on BSE. The strong listing was on the expected lines, as the issue was subscribed 41.88 times.

Shankara is a niche player in the organised retailing of home improvement and building products, Maurya of Angel Broking said, adding, “The big positive take-away for the investors is that Shankara has been consistently increasing the share of its retail business and reducing the share of institutional business.”

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“From a profit traction point of view, this is important because retail happens to be the more profitable side of this business, which is evident from the company’s OPM (operating margin) improving from 4.6% in 2014 to 6.4% in 2017,” he said.

Prior to the IPO opening, Angel Broking had said that the valuation at 18.2 times earnings is attractive considering the earnings traction. “With a premium listing, the valuations stand at 24.2 times earnings,” it said today.

Shankara BuildPro had sold 65 lakh shares in its IPO, which ran from 22 March to 24 March, to raise Rs 345 crores in order to use the funds to pay or pre-pay loans and for general corporate purposes.

Non-institutional investors, including high-net-worth individuals (HNIs) applied for shares 91 times their quota limit while Qualified institutional buyers (QIBs) overbid 51.62 times of their reserved portion. Retail investors applied 15.35 times their allotment limit.

 

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