Most analysts had advised subscribing to the issue for listing gains as well as for the long term, but with a strong start in the secondary market, some of them say investors should book profits.
“We had recommended ‘subscribe’ on the Dodla Dairy IPO. At CMP, the stock is trading at 23 times its earnings on the basis of 9MFY21 annualised profit, which leaves little room for upside. Hence, we recommend booking profits,” said Amarjeet Maurya – AVP – Midcaps, Angel Broking.
Dodla Dairy is a Hyderabad-based company that sells fresh milk, ghee, butter, curd, paneer, gulab jamun, doodh peda, basundi and junnu, which are targeted at consumption at home. It sells UHT milk, flavoured milk, ice cream and beverages such as buttermilk.
At the issue price, the stock was valued at 16 times annualised FY21 earnings on a post-issue basis. The Rs 520.17 crore IPO by the third-largest dairy player was sold from June 16 to June 18. The issue received bids for 38,80,64,950 shares, which was 45.62 times the offer size of 85,07,569 shares.
Over FY18-20, Dodla’s revenues rose 16 per cent annually and Ebitda by 12 per cent annually. Profit after tax (PAT) fell 6 per cent annually during the same period. That said, Ebitda margin for the nine-month period soared to 14.6 per cent from 6.6 per cent in FY20.
Analysts said maintaining such high margins is difficult as it was achieved on cost-cutting measures. The management has also guided towards normalisation of margins.
Dodla Dairy derives about 30 per cent of its revenue from the value-added products, the share of which is likely to accelerate going ahead, which many see as a big positive for the company.
“The issue was reasonably priced vis-a-vis its peers, which also led to strong interest in the counter apart from its presence in niche space. However, the listed companies in this space have not done well so far, thus it needs to be seen how this company performs going ahead,” said Hemang Jani, Head Equity Strategy,
On Monday, the stock close 15 per cent higher at Rs 609. It hit a high of Rs 633 during the day, up 48 per cent over issue price, which is also the upper circuit level for the stock.
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