The much-anticipated initial public offering (IPO) of Laxmi Dental has generated substantial buzz among investors, given the company’s unique positioning as India’s only end-to-end integrated dental products manufacturer. The INR 698 crore IPO includes a combination of fresh issue and an offer for sale. Let’s dig deep into Laxmi Dental IPO analyst views:
Financial Performance and Valuation
Laxmi Dental has showcased a remarkable financial turnaround in recent years. The company’s revenue surged from INR 136.8 crore in FY22 to INR 193.5 crore in FY24. Moreover, its EBITDA margins reached an impressive 74.95% in FY24, marking a notable transition from losses to profitability and reflecting the company’s operational efficiency.
However, the valuation is a key concern. The IPO’s price-to-earnings (P/E) ratio stands at a steep 87.77x, indicating that the offer is fully valued. Ms. Mishra recommends the IPO primarily to long-term investors willing to tolerate premium valuations.
Ms Geetanjali Kedia of SPTulsian Investment Advisors echoes these valuation concerns. While acknowledging the company’s high gross margins of approximately 75%, she notes that Laxmi Dental operates in a fragmented industry where it holds only a marginal market share. The steep valuation metrics, including a one-year forward revenue multiple of 8x and a P/E multiple of 53x, make the IPO appear expensive compared to global peers like Align Technology.
Growth Potential and Risks
Laxmi Dental’s focus on capacity expansion and the growing demand for clear aligners highlight significant growth opportunities. The company’s performance in H1FY25—with an 18% profit-before-tax (PBT) margin and a 15.5% net margin—signals improving profitability. Nonetheless, its inconsistent financial track record raises concerns. The company reported net losses in FY22 and FY23, underscoring the challenge of sustaining consistent growth.
Furthermore, Ms. Kedia warns of potential market sentiment shifts due to OrbiMed’s significant stake, which may influence stock performance post-lock-in period. The limited scope for valuation expansion further dampens the appeal for retail investors seeking high returns.
Laxmi Dental IPO Analyst Views
Ms. Anubhuti Mishra: Ms. Anubhuti Mishra recommends the IPO for investors with a long-term perspective, highlighting the company’s robust technological capabilities and financial turnaround. However, she advises potential investors to carefully evaluate the risks and uncertainties before making an investment decision.
Ms. Geetanjali Kedia: She adopts a cautious stance, pointing out the steep valuations and Laxmi Dental’s fragmented industry position. While the company’s growth prospects are evident, she emphasizes that the high pricing and profitability metrics make the IPO less appealing to short-term investors.
The following analyst insights highlight the common trends in brokerage house recommendations for the upcoming IPO. Here’s a more extensive list of broker suggestions:
BP Wealth – Subscribe
Capital Market – Subscribe for long-term
Canara Bank Securities – Subscribe
Elite Wealth – Apply
Jainam Broking – Subscribe for long-term
Mehta Equities – Subscribe for long-term
Nirmal Bang – Subscribe
Samco Securities – Subscribe for listing
SBI Securities – Not rated
SMC Global – 2/5
Ventura Securities – Subscribe
Conclusion
The Laxmi Dental IPO represents a mix of promising opportunities and noteworthy challenges. The company’s position as a pioneer in the dental products market, coupled with its financial turnaround and focus on clear aligners, is compelling. However, premium valuations, regulatory hurdles, and industry fragmentation pose substantial risks.
For investors, the decision to participate in the IPO hinges on their risk tolerance and investment horizon. While long-term investors may find value in Laxmi Dental’s growth potential, retail investors seeking immediate gains should weigh the pricing concerns and market dynamics carefully.
