Mumbai-based healthcare diagnostics firm Metropolis Healthcare is going to launch its IPO today in the price range of INR877 – 880 per share. Coming on the back of the positive word created by rewarding listings of Dr Lal Path Labs and Thyrocare, the IPO will offer an exit route to private equity investor Carlyle Group. The PE firm plans to offload half of its shareholding in the company through the upcoming IPO. Despite a healthy balance sheet and growing profits, the public offer seems to have polarized the analyst fraternity with some brokerage houses advising clients to avoid the IPO. Here is a compilation of Metropolis Healthcare IPO recommendations by major brokerage houses.
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SMC Global Securities rated the upcoming IPO at 3.5 stars noting the competitive strengths of the company, namely a comprehensive test menu, widespread operational network, strong and established brand and established track record of successful acquisition and integration in India and overseas. “With fundamentals such as widespread operational network, young patient touch point network, Strong and established brand with a focus on quality and customer service and asset light growth of service network, the company is expected to see good growth going forward. Moreover, the company has shown good revenue growth in the last 5 years. It is a debt free company. Investor should opt the issue,” noted the analyst recommendation.
Without rating the IPO, ICICIdirect said the key risks for the company include the highly competitive nature of diagnostics industry in India, risk of implementation of pricing policies by the government and high dependency on institutional customers. The brokerage house also noted that as the third largest diagnostics service provider in India, Metropolis Healthcare is well positioned to leverage expected growth in diagnostics industry.
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Metropolis Healthcare IPO recommendations: Not everyone is impressed
Choice Broking acknowledged that the company had competitive advantages in the form of a widespread operational network, young patient touch point network and asset light growth of service network. At the same time, analyst Rajnath Yadav finds that these positives are factored into the valuations demanded by the company, thereby leaving limited upside.
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“Based on the higher price band, MHL is demanding a P/E valuation of 43.2x (to its FY18 EPS of Rs. 20.4), which is a premium to peer average of 40.7x. Based on FY19E and FY20E EPS, the company is demanding a P/E valuation of 39.6x and 33.9x, respectively, which again is at premium to FY19E and FY20E peer P/E valuation. Thus, considering the above observations we feel that the issue is fully priced, thereby providing a “AVOID” rating. With strong fundamentals and leadership position in the operating regions, long term investors can enter in this script at lower price if possible post listing,” said Choice Broking’s IPO note.
We will continue adding to this list as we get access to more reports. Meanwhile, check out our discussion page for Metropolis Healthcare IPO to understand what fellow investors feel about the upcoming IPO.
