Jyoti CNC shares jump 13% over listing price but analysts are concerned. Should you book profits?
Jyoti CNC Automation jumped nearly 13% after a decent debut on the exchanges on Tuesday. The stock was last trading at Rs 418 apiece, up 27% over the issue price of Rs 331.
The premium listing was in line with expectations, which can be attributed to the company's market leadership and a substantial presence in the global CNC machine manufacturing market.
The focal points in the company's business model are its client base, healthy margins and a proxy play on the defense sector.
However, the hefty valuations remain a concern.
«The market optimism appears contingent on the company's anticipated profitability in the ensuing years. However, the steep P/E ratio of 324x based on the latest year's EPS warrants scrutiny, especially when juxtaposed with the peer group,» said Dhruv Mudaraddi, Research Analyst, Stoxbox.
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The company plans to utilize the IPO proceeds to substantially reduce its long-term debt by 50%, and thereby improve the balance sheet.
Post the debut, analysts advised investors to book profits and those who wish to hold can keep a stop loss around the issue price.
«Jyoti CNC's listing debut was positive but overshadowed by concerns.
Thus, we recommend investors to book profit and exit their position,» said Shivani Nyati, Head of Wealth, Swastika Investmart.
Jyoti CNC has a robust order book of Rs 3,300 crore, that will be executed over the next few years. Its other strengths include a diversified product portfolio and customer base, strong global outreach and the ability to use technology to good effect to capture growing market opportunities.
The company posted a revenue and EBITDA CAGR of 27% and 75%,
