SP Refractories Limited

SP Refractories Limited is engaged in manufacturing and supplying Refractory Material made using hydrated lime, Calcined Alumina and other raw materials. Company's core focus is on refractory cement which is a niche and high margin cement widely used in iron & steel and construction industries because of its thermal conductivity, Maximum strength and Heat resistance.  The Company began its operations in the year 2007 with manufacturing of refractory cement and castables. Before incorporation of the company, Late Sri. Prabodh Kale, was running the established business of refractory cement in a partnership firm named Shanark Industries based out of Nagpur.  As claimed by the management, SPRL has a healthy client base due to its quality product, customized solutions and large product line. It has a clinkers manufacturing capacity of 4000 MT per year and Clinkers crushing capacity of 6000 MT per year. Company's get clinkers manufactured from outsider on job work basis and thereafter process of crushing the clinkers, blending and packing of refractory cement in powder form carries out in our manufacturing facility for excess capacity of crushing As per financial performance, SP Refractories Limited has posted total income/net profits of Rs 18.55 Cr / Rs 0.20 Cr (FY19), Rs 20.99 Cr / Rs 0.39 Cr (FY20), Rs 25.72 Cr / Rs 0.75 Cr (FY21) and Rs 14.47 Cr / Rs 0.80 Cr (H1 FY22). So company has shown good results over last couple of years. Company has posted an average EPS of Rs 3.65 and average RoNW of 12.44% for last three fiscals. Issue is priced at a P/B of 2 as per NAV of Rs 44.99 post issue. As per FY21 earnings on fully diluted equity post issue, asking price is at P/E of around 21.39 and as per annualised FY22 earnings P/E is 9.98. As per RHP Comparison between listed peers are shown in above table.    On BRLM's front, Aryaman Financial Services Limited associated with this SME IPO and handled 17 IPOs in last 3 years. From last 10 IPOs, one opened below issue price and remaining above issue price or at par. As of now from last 10 IPOs, three are trading below and remaining are trading above issue price or at par. ( As on 22.03.22 ) As per financials, SPRL has shown good results, RoNW is 16.13% and P/E is respectively 21.39 and 9.98 as per FY21 and annualised FY22 earnings, which looks fully priced, but sudden rise in profit in H1 FY22 raises concerns. Also the segment in which company operates is highly competitive and fragmented. Performance of BRLM is average post listing. So we are giving AVOID rating to this IPO.

• 1 Namita Prabodh kale
• 2 Shweta  Prabodh kale
• 3 Prajakta Prabodh kale