Thyrocare Technologies’ Initial Public Offer (IPO) hit the capital markets on Wednesday to raise about Rs 480 crore. The issue is scheduled to close on April 29. The company runs a diagnostics laboratory chain across the country. It has fixed a price band of Rs 420 to Rs 446 for the IPO. The company will garner around Rs 479.21 crore at the upper end of the price band.
For FY2011-15, its compounded annual growth rate (CAGR) for sales is 23 per cent, where the sales grew from Rs 78 crore to Rs 180 crore in FY2015. The company’s operating profit grew at CAGR of 20 per cent, from Rs 35.6 crore to Rs 73 crore in FY2015. Its profit increased by 18 per cent annually (CAGR) from Rs 25 crore to Rs 48.5 crore in FY2015.
The company has no debt on books.
Should you invest? Here is what top brokerage firms are saying about the IPO
Angel Broking: The company is valued at a P/E multiple of 42.3-44.9x its FY2016E annualised earnings per share (EPS) at the lower and upper end of the issue price band. This compares with a P/E multiple of 61.9x FY2016E EPS for Dr Lal Pathlabs. Although the issue seems to be priced at a discount to Dr Lal Pathlabs, the brokerage house believes that Thyocare’s consolidated ROIC (return on invested capital) will come under pressure in the near term as it has entered the molecular imaging space by acquiring Nuclear Healthcare Ltd (NHL).
Thyrocare could potentially provide listing gains, the pressure on its ROIC in the near term and the not-so cheap valuation demanded by it will keep the upside in the stock limited. Angel Broking has ‘Neutral’ rating on the issue.
Read more: Thyrocare IPO: 10 things to know before investing
KR Choksey Shares and Securities: The brokerage house advises to ‘Subscribe’ for the said IPO both for listing gains and to reap long term benefits on account of a robust business model, healthy balance sheet, strong business prospects and ability of the management to leverage its capabilities in a bid to cultivate its business.
Motilal Oswal: At a price band of Rs 420-446, the issue is priced at 47.7- 50.7x price-earnings (PE) ratio for FY2015 consolidated earnings per share (EPS) of Rs 8.8 and 30-32x EV/EBIDTA for FY2015. The valuations at the offer price are similar to that offered in the public issue of recently listed comparable players like Dr Lal Pathlabs. After listing, the premium valuations of Dr Lal Pathlabs have expanded further due to its strong track record, healthy return ratios and high free cash flows despite the aggressive expansion and exponential growth in the business.
HEM Securities: Thyrocare with portfolio of specialised tests and an emphasis on wellness and preventive healthcare has pan-India collection network supported by logistics capabilities and information technology infrastructure. Also, co’s multi-lab model drives volume growth and economies of scale with capital efficiencies in its diagnostic testing business. Looking after strong financial performance & bright business prospects of company , the brokerage house recommends to ‘Subscribe’ the issue.
SMC Investment and Advisors: The fundamentals of the company look good. It is expected that the company would see good growth from opening of new regional laboratories, increasing the battery of preventive healthcare tests and achieving higher economies of scale. Its tests include 16 profiles administered under “Aarogyam” brand, which offers patients a suite of wellness and preventive health care tests. A long term investor can opt this issue.