Several analysts have sounded positive notes on the upcoming IPO of Thyrocare Technologies and have advised investors to apply in the public offer. Analysts’ recommendations are largely positive on expected lines as we also noticed in our analysis. Thyrocare operates on a tried and tested business model, has strong profit margins and thus, these positive recommendations are hardly surprising.
In its research note, Hem Securities has recommended investors to apply to the IPO on the basis of strong financial performance and bright business prospects of the company. “The company is bringing the issue at price band of INR440-446 per share which will convert into p/e multiple of 42-45 per share on post issue 9m FY16 annualized eps of INR9.94 per share. The company with portfolio of specialized 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, we recommend SUBSCRIBE the issue,” read the brokerage house’s report.
Noting that valuations of Thyrocare are lower than its peer Dr Lal Path Labs, analysts at Ajcon Global have also recommended investors to subscribe to the IPO. “At the upper end of the price band of INR446, the IPO is valued at a P/E of 45x at annualised FY16 Post issue EPS of 9.9 which is cheap as compared to its immediate peer Dr. Lal Path Labs trading at a P/E of 84x. With due consideration to factors like a) portfolio of specialized tests with an emphasis on wellness and preventive healthcare, b) multi lab model – driving volume growth and economies of scale, c) pan-India collection network supported by logistics capabilities and information technology infrastructure, d) capital efficiencies in the diagnostic testing business, e) debt free Company, f) past strong financial performance, g) attractive ROE and ROCE in this kind of business model, h) offer price similar to its peer Company – Dr Lal Pathlabs IPO which expanded post listing; we recommend to SUBSCRIBE the issue,” said Ajcon’s research note.
Robust growth prospects justify the premium valuation of Thyrocare IPO, said India Infoline. “At the upper band, the stock is priced at ~27x FY18E earnings which is at discount to its close competitor Dr Lal PathLabs (~43x FY18E earnings). We believe premium valuations are justified given the strong growth prospects. Recommend investors to SUBSCRIBE the IPO,” the Mumbai based brokerage house advised investors in its note.
GEPL Capital noted that Thyrocare shares are offered at a discount to competition. “We believe that this valuation looks cheaper and have further potential to grow. So we recommend SUBSCRIBE to this IPO,” said the brokerage house.
SPA Research advised long term investors to SUBSCRIBE to the issue. “Wellness and preventive healthcare segment of the healthcare industry is expected to grow at a compounded rate of 25% over the next 3 years. Thyrocare is well poised to capture this opportunity given its pan-India diagnostic network, attractive operating metrics and strong cash flow generation,” said the research note.