Ahead of the opening of the public offer tomorrow, Tejas Networks IPO (TNL IPO) has received positive analyst recommendations. The IPO, priced in the range of INR250 – 257 per share, will mobilize a total of INR776.68 crore at upper end of the price band. Retail investors will get only 10% in the IPO which aims to augment the company’s working capital. Here is a snapshot of what brokerage houses have to say regarding Tejas Networks IPO recommendations.
Angel Broking considers the company a technology leader, thanks to 333 patents applications filed across the world. “TNL has reported strong revenue CAGR of 24.2% CAGR over FY2013-17 and PAT of `64cr in FY2017 (loss of `79cr in FY2013). The RoE improved from 8% in FY2016 to 12.9% in FY2017, primarily owing to ongoing capex on Optical Network by Telcos, strong operating leverage with asset light business and strong professional team with significant industry experience. At the upper end of the price band, the pre-issue P/E works out to be 29.3x its 2017 earnings, 3.7x of FY2017 Book Value. Moreover, the company’s debt free balance sheet post IPO coupled with the government’s push for digital India would support the growth momentum. Thus, we recommend a SUBSCRIBE on the issue,” said the brokerage house’s report.
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GEPL Capital further added in positive Tejas Networks IPO recommendations. “Tejas Networks Ltd stands to gain from operating leverage. At a P/E of 27.34x of FY17 EPS, we believe that it demands a discount to its domestic peers. We assign a Subscribe rating to the IPO,” said its IPO note while adding that the company is well placed to capitalize on the necessitated growth in optical capital expenditure by telecommunications companies and government entities.
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Bolstering positive Tejas Networks IPO recommendations was Hem Securities which noted that the company’s positive fundamentals balance the offer’s high valuations. “At price band of Rs 250-257 ,co is bringing the issue at p/e multiple of around 29 on FY17 Eps. Although co’s business model looks quite attractive but looking after valuation , issue looks expensive at current level. Hence we recommend “Subscribe” on issue for long term,” said the research report.
IDBI Capital has also put a subscribe rating on the upcoming IPO, while listing high receivable days and expansion in Africa as potential risks. “At the price band of Rs250-257, Tejas Networks’ implied PER is 25x on FY17 adjusted EPS of Rs10.2 which we believe is reasonable given the revenue/earnings growth potential over the next 3-5 years,” said the report.
Choice Broking further added to positive Tejas Networks IPO recommendations, although it has found valuation slight expansive. “At higher price band, the demanded P/E multiple of 24.6x is in-line with the global peer P/E average of 24.9x. On other valuation metric (i.e. P/BVPS, EV/Sales, EV/EBITDA and MCAP/Sales), Tejas is asking a premium valuation. Based on our quick estimate for FY18, we forecast a FY18 earnings of Rs. 13.4 per share, which translates into a FY18 forward P/E multiple of 19.2x (as compared to the one year forward peer average of 17.5x). Thus the issue seems to be slightly expensive. Thus considering the above observations, positive outlook of the industry and positioning of the company in the industry, the forward valuation demand by the company seems to be attractive, provided the FY17 business momentum continues. Thus we recommend a “SUBSCRIBE” rating for the public issue,” noted its research note.
