Started in 2002, Five Core Electronics Limited is a New Delhi based company, which manufactures as well as exports PA systems like Woofers, Amplifiers, Computer Speakers, Personal Speaker System, Headphones and Earphones. Company has been trading in fabric also. 5CORE is a leading manufacturer of Public Address Systems in the country and has a strong presence in the overseas market in African Continent, UAE, South America, Singapore, Dubai,Bangladesh, Vietnam Nepal, etc. Its products are sold in 56 countries across 6 continents through a network of over 350 distributors and dealers. In India, they are present in 17 States through a distributor and dealer network of more than 240 in different zones. Company has also opened showrooms in Dehradun, Saharanpur, Chomu, Guwahati, Jeopur, Patna, Raxaul, Bhagalpur, Calicut and Hyderabad which are run by the dealers. PAN Arabian Ventures FZE and South Asia Exim Pte. Ltd were incorporated in Dubai and Singapore respectively as wholly owned subsidiary of the Company. Company’s R & D Unit and manufacturing facilities are located at the Delhi and Bhiwadi, Rajasthan. Company has 296 employees in its payroll. As per financial performance, FCEL has posted total revenue/net profits of Rs. 85.58 cr. / Rs. 0.74 cr. (FY13), Rs. 111.80 cr. / Rs. 0.85 cr. (FY14), Rs. 113.49 cr. / Rs. 0.66 cr. (FY15), Rs. 122.94 cr. / Rs. 0.95 cr. (FY16) and Rs. 170.65 cr. / Rs. 1.35 cr. (FY17). For upto Q3 of the FY18 it has earned net profit of Rs. 10.21 cr. on a turnover of Rs. 245.61 cr. Thus year after year it has posted improved performance except FY15, but the bottom-line increase in FY18 is very surprising. For last three fiscals it has posted an average EPS of Rs. 2.03 and an average RoNW of 4.9%. The issue is priced at a P/BV of 1.83 on the basis of post issue NAV of Rs. 76.44. If we annualise latest earnings and attribute it on fully diluted equity post issue then asking price is at a P/E of around 13. As per offer documents, there is no exact peers listed in market. Issue looks fully priced as per latest earnings, but when we consider FY17 earnings, then P/E is around 130 and it looks very aggressively priced. On merchant banker's front, there are two BRLMs associated. For, Sarthi Capital Advisors Pvt Ltd, this is the 41th IPO and out of recent 10 listings, 1 opened below issue price, 2 at par and remaining with 1% to 20% premium on the day of listing. As of now from last 10 IPOs, 5 are trading above issue price and remaining below issue price. For, Indian Overseas Bank, this is the 7th IPO and out of recent 6 listings, 1 opened below issue price and remaining with 15% to 20% premium on the day of listing. As of now from last 6 IPOs, 4 are trading above issue price and remaining below issue price. As per financials, company's performance is good, RoNW is 4.9% and issue is fully priced as per latest earnings. When we check valuations with FY17 earnings, it looks very aggressively priced. Company has good business model and it may able to grow at same rate. So we give NEUTRAL rating to this SME IPO as per current market situation.
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