Stellar listing gains for Apollo Micro Systems: Debuts at 74% premium at Rs 478; should you hold shares or sell?

Shares of Hyderabad based defense equipment manufacturer Apollo Micro Systems made an excellent debut on the exchanges on Monday morning, as the shares listed at a premium of 74% at Rs 478, as compared to issue price of Rs 275.  Apollo Micro Systems IPO to raise up to Rs 156 crore got a blockbuster response earlier this month, becoming one among the only four companies to record above 200 times subscription as non institutional investors bid for nearly 1,000 times their reserved quota of shares.

The issue received bids for a total of 1,02,63,79,000 shares as against an issue size of 41,44,955 shares, implying a subscription of 247.5 times as at the end of third day of bidding, data with the exchanges showed.

Even as the allottees and other investors alike maybe mulling as to whether buy, sell or hold the shares upon listing, analysts say that Apollo Micro Systems is a fundamentally strong company, and advice long-term investors to hold on to the shares.

“Apollo Micro Systems is a fundamentally strong company and we expect strong growth in defense sector going forward. Investors may want to book profits beyond 50% gains,” Amarjeet Maurya, Senior Equity Research Analyst- Mid Caps, Angel Broking told FE Online last week. The firm had given a subscribe rating to the issue.

“Apollo Micro Systems 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 had said in its IPO note.

“I expect around 30% listing gains. Any PE above 31 is not cheap. Get back to valuations. We would advise investors to exit beyond 40% listing gains,” Atish Matlawala, Senior Research Analyst at SSJ Finance told FE Online.  

“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,” SSJ Finance had said in its report.

Choice Broking, which had given a ‘Subscibe with Caution’ rating on the issue says that the stock is good for long-term investors. “Keep it for long-term, despite listing gains. It’s a good stock for long-term investors. A god issue fundamentally. We had a subscribe with caution rating given the concerns in working capital,” Rajnath Yadav of Choice Broking told in an interview to FE Online.