Qualitek Labs Limited is primarily engaged in the business of provides testing, inspection, homologation, certification and consultancy services to various industries viz the automotive, defence, metals & metallurgy, environment and water, minerals, food & agriculture, pharma & healthcare. Within 5 years of incorporation, some of the significant achievements are: a) The Company has commenced its business operation of providing services to the clients from a testing laboratory, which was set up in Pune in the year 2018. Later in the year 2022, the Company expanded and established the second laboratory in Bhubaneshwar. b) The Company is in process of setting up another two testing laboratories at Pune and Noida. c) Increase in turnover from Rs. 635.49 lakhs in FY 2020-21 to Rs. 1913.66 lakhs in FY 2022-2023. The Company’s focus is to utilize the core strengths for expanding the operations in existing as well as new markets. The Company, meticulously engineered with a cutting-edge technology and aptly supported by an efficient team of trained personnel who market the services in unexplored markets, intends to acquire bigger share of this competitive industry which hitherto was not captivated or dominated by any other testing laboratories. As of now, the Company’s presence is in Pune and Bhuwaneshwar where they are providing services relating to automotive, defence, metal and metallurgy sectors. They intend to expand the services in other geographies where they have the availability of talent to execute and provide services in cost effective and efficient manner to the customers. They are currently in process of establishing two new laboratories in Noida and Pune, apart from the existing laboratory in Pune. As per financial performance, Qualitek Labs Limited has posted total income / net profits of Rs 6.38 Cr / Rs 0.15 Cr (FY21), Rs 12.06 Cr / Rs 0.42 Cr (FY22), Rs 19.35 Cr / Rs 2.97 Cr (FY23) and Rs 12.51 Cr / Rs 2.00 Cr (upto Q2 FY24). So as per previous financials data, company has shown good growth, but sudden rise in net profit just before IPO raises doubts. Company has posted an average EPS of Rs 17.36 and average RoNW of 1.54% for last three fiscals. Issue is priced at a P/BV of 2.50 as per NAV of 40.03 as on Post issue. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 174.69, 24.83 and 18.35 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Oneview Corporate Advisors Private Limited is associated with this SME IPO and handled 2 SME IPOs in last 2 year. From last 1 IPO, that opened above issue price on the day of listing. As of now from last 1 IPO, that is trading above issue price. ( As on 17.01.24 ) As per financials, Qualitek Labs Limited has shown good results, RoNW is 30.10% and P/E is respectively 174.69, 24.83 and 18.35 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced. But sudden rise in net profit just before IPO raises doubts and it may be difficult to maintain same margin in future. Company is in business of provides testing, inspection, homologation, certification and consultancy services to various industries, which is highly competitive and fragmented segment. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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