Image credit: https://www.cyientdlm.com/
Cyient DLM’s shares had a remarkable debut in the secondary market on Monday, July 10, following the successful conclusion of the electronic manufacturing services firm’s Initial Public Offering (IPO) last month. The IPO witnessed an overwhelming subscription of over 67 times the available equity. In the listed market, the stock made its entry on the BSE at Rs 401 per share, representing a significant premium of 51.3% over the upper end of the IPO price range.
On the NSE, Cyient DLM shares debuted at Rs 403 per share, commanding a premium of 52%. By the end of the listing day, the stock maintained a substantial premium, closing at Rs 420.8 per share on the BSE and Rs 421.8 per share on the NSE, representing a premium of approximately 59%.
While many analysts recommend existing investors to retain their holdings for long-term gains due to favorable growth prospects, they caution against fresh purchases at the current levels.
According to Anubhuti Mishra, an Equity Research Analyst at Swastika Investmart, “Cyient DLM is a fundamentally robust company, exhibiting a strong track record of growth, and well-positioned to benefit from the rising demand for digital manufacturing solutions. We do not recommend fresh buying at the current level. However, existing investors can continue to hold the shares for the long term, setting a stop loss at Rs 362.7.”
On the other hand, Prashanth Tapse from Mehta Equities advises investors to secure profits and await a potential dip in the counter before considering fresh purchases. Tapse states, “We advise investors who were allotted shares to book profits, and if anyone intends to buy, they should exercise caution and monitor the counter as market conditions may exert pressure to maintain higher levels.”
Vaibhav Kaushik, a Research Analyst at GCL Broking, suggests, “Based on our analysis, the stock has delivered outstanding returns since its launch. Long-term investors can continue to hold the stock, setting a stop loss at Rs 377. However, for new purchases, entry can be considered around the 390 levels, maintaining the same stop loss at 377.”
Before its listing, Cyient DLM’s Rs 592 crore Initial Public Offering (IPO) garnered massive interest from investors, with a subscription rate of 71.3 times. In the unlisted market, the company’s shares commanded a premium of Rs 155.
The net proceeds from the IPO will be utilized to fund incremental working capital requirements, capital expenditure, debt repayment, and other general corporate purposes.
Cyient DLM operates as an integrated electronic manufacturing service (EMS) and solutions provider, focusing on the entire product life cycle, including design, build, and maintenance. At the upper price band, the company is valued at a price-to-earnings (P/E) ratio of 66.2x FY23 earnings, aligning with industry peers’ valuations, as per analysts.
During the financial year ending March 2023, the company’s revenue from operations witnessed a growth of 15% to reach Rs 832 crore, while the profit for the same period increased by 4% to Rs 31.7 crore.
The company generates a significant portion of its revenue, around 63%, from printed circuit board assembly (PCBA), and approximately 32% of the revenue comes from box builds used in safety-critical systems like cockpits, inflight systems, landing systems, and medical diagnostic equipment.