Mazagon Dock Shipbuilders Ltd IPO Note

Mazagon Dock Shipbuilders Ltd IPO Note
IPO
by Nikita Bhoota 29/09/2020

Mazagon Dock Shipbuilders Ltd. IPO

Rating: Subscribe

 

Issue Opens: September 29, 2020

 

Issue Closes: October 01, 2020

Price Band: Rs.135-145

Issue Size: Rs.444cr (at upper price band)

Bid Lot: 103 Equity shares

Issue Type:OFS & Fresh Issue

 

% Shareholding

Pre IPO

Post IPO

Promoter

100

15

Public

0

85

Source: RHP

 

 

Company Background

Mazagon Dock Shipbuilders Ltd. (MDL) is a Defence Public Sector Undertaking under ministry of Defence. It is one of the India’s leading shipyards with a maximum shipbuilding and submarine capacity of 40,000 DWT (Source: Crisil).  The shipyard builds and repair warships and conventional submarines at its facilities in Mumbai and Nhava for the MoD for use by the Indian Navy and other vessels for commercial clients. Since 1960, MDL has built a total of 795 vessels including 25 warships, from advanced destroyers to missile boats and three submarines. MDL had also delivered cargo ships, passenger ships, supply vessels, multipurpose suppose vessels, water tankers, tugs, dredgers, fishing trawlers, barges and border outposts for various customers in India as well as abroad. The business divisions in which MDL operates are (i) shipbuilding and (ii) submarine and heavy engineering. Its shipbuilding division includes the building and repair of naval ships. Its submarine and heavy engineering division includes building, repair and refits of diesel electric submarines.

Offer Details

The issue consists of Fresh Issue of Offer for sale of ~3 Cr shares amounting to Rs.444 Cr.

 

Financials

 

Consolidated Rs Cr

FY17

FY18

FY19

FY20

Revenue

3,519

4,470

4,614

4,978

EBITDA (%)

3.6

3.5

5.7

5.4

Adj EPS (Rs)

29.7

24.6

26.4

24.1

PE(x)

4.9

5.9

5.5

6.0

ROE (%)

40.0

17.0

17.6

15.5

Source: RHP, 5paisa Research, Note: EPS &P/E is on upper end of price band

Key Points

MDL is one of the few shipyards under the MoD that only makes warships at the moment and is the only shipyard to have built destroyers and conventional submarines for the Indian Navy. MDL is also one of the initial shipyards to have built Corvettes in India. We believe that its strong pedigree in making warships & conventional submarines are likely to provide an upper hand in garnering additional orders like Project P-75I where it has cleared all benchmarks. Indian Maritime security has been garnering significant attention in the past decade and geopolitical tensions with China (growing military presence in the Indian ocean) are likely to result in steady fleet and submarine additions.

MDL’s order book is likely to be executable over 6-7 years which even without considering order inflows provides strong revenue visibility. It has sufficient capacity in place and is exploring additional development which can help cater to any uptick in orders. MDL intends to increase its ship repair revenues from ~3% of overall revenues (FY20) to 15-20% gradually which bodes well from profitability perspective. Increasing retention of cost savings and potential ~50bps increase in margins under revised acquisition procedures are key margin drivers.

Key Risk Factors:

Liberalization of policies for Make in India initiative may open up competition which may result in loss of upcoming awards in favor or private sector or foreign players and may trigger aggressive bidding

Covid or outbreak of any other severe communicable disease could have a potential impact on its business and results of operations.

Conclusion:

Considering the revenue visibility, good dividend yield of ~6% and undemanding valuations, we recommend SUBSCRIBE on the Mazagon Dock IPO issue.

Watch this video to know about the issue and what management has to say on this.

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UTI AMC IPO Analysis: All You Need to Know About the Issue

UTI AMC IPO Analysis: All You Need to Know About the Issue
29/09/2020

UTI Asset Management Company Limited is coming up with Initial Public Offer of Equity Shares that is opening on 29th September 2020 and will continue till 1st October 2020. The company will open the initial public offer of equity shares of face value bearing Rs 10 each. The price band fixed at Rs 552 to Rs 554 per equity share. Bids can be made for a minimum of 27 Equity Shares and in multiples of 27 Equity Shares thereafter.

UTI Asset Management Company Limited is the second largest asset management company in India in terms of Total AUM and the eighth largest asset management company in India in terms of mutual fund QAAUM (Quarterly Average Assets Under Management) as of 30th June 2020.

The company has four sponsors for each of which, the Government of India is a majority shareholder. At present it has 11 million live folios accounting for 12.8% of client base managed by the Indian mutual fund industry.

This offer consists of an initial public offer of up to 38,987,081 Equity Shares by the Selling Shareholders comprising an offer for sale of up to 10,459,949 Equity Shares by State Bank of India, up to 10,459,949 Equity Shares by Bank of Baroda, up to 10,459,949 Equity Shares by Life Insurance Corporation of India, up to 3,803,617 Equity Shares by Punjab National Bank and up to 3,803,617 Equity Shares by T. Rowe Price International Ltd. Around 200,000 Equity Shares of the offer would be reserved for the eligible employees.

UTI AMC IPO at a glance

IPO Date

29th September to 1st October

Issue Size

38,987,081 Eq Shares of Rs 10
(aggregating up to Rs 2,159.88 Cr)

Finalisation of basis of allotment

7th October

Demat Credit

9th October

IPO Listing

12th October

Face Value

Rs.10 per equity share

IPO Price Band

Rs.552 to Rs 554 per equity share

Market Lot

27 Shares

Min Order Quantity

27 Shares

Minimum Retail Application

1 lot (Rs 14,958)

Maximum Retail Application

13 lots (Rs 194,454)


How to apply for UTI AMC IPO?

You can apply for the UTI AMC IPO either offline or online. Ideally, you can use the ASBA route to apply for the IPO. Application Supported by Blocked Amount (ASBA) allows you to just block the monies without debiting at the time of application. On allotment, only the amount allotted will be debited and the balance amount is released. You can also use the UPI facility to apply for the IPO with select brokers.

If you intend to apply for UTI AMC IPO through your 5paisa account, you need to follow the steps as mentioned below:

  • Login to your 5paisa mobile app
  • Under trade section click IPO
  • Select current issue
  • Enter your bidding details along with your UPI ID and save details
  • Once the details are saved, you will get an payment notification with 4-5 hours
  • Open your UPI app, go to one-time mandates
  • Your will get requested IPO mandate along with its amount
  • Select mandate and approve for payment
Watch this video to know about about the issue, company's profile, financial sheet, peer comparison and future growth. 

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5 Stocks to benefit from Modi’s rural focus policies

22/10/2020

The Modi Government is actively focusing on reviving the rural economy. The government has undertaken many initiatives in order to improve consumption, infrastructure and job opportunities in the rural parts of India. Various programs have been designed by the Government to fulfill the rural requirements. In order to double the farm income by 2022, the government has allocated Rs1.07 lakh crore for expenditure on rural development, out of which Rs.48,000cr is allocated to MNREGA for FY2017-18. At present, as per the media articles, India has ~4 crore un-electrified rural households and the Government targets to provide electricity to every village under its Deendayal Gram Jyoti Yojana. Moreover, the Pradhan Mantri Awaas Yojana (PMAY) plans to provide shelter to people in rural India.

We believe that with increasing rural income levels in the coming years, the rural consumption will get a boost, which in turnwould prove positive for the Indian business scenario. We have chosen some stocks that are likely to benefit from the pick-up in rural economy and are good investment bets from a long term perspective.

Mahindra & Mahindra Financial Services (MMFSL)

MMFSL is one of the leading non-banking finance companies in India, which focuses on the rural and semi-urban sectorsand is the largest Indian tractor financier.Its AUM mix comprised of auto/UV (28%), tractors (17%), cars (22%), CV (12%), pre-owned cars (9%) and SME (12%) as of September 2017. AUM is expected to grow at 17% CAGR over FY17-19E on account of pick-up in rural economy supported by average monsoon in the last two years.. NCDs are forecasted to be ~60% of funding mix in FY19E (vs. 47% in Q2FY18). This will lead to lower cost of funds and margin expansion by~130bps to 8.1% in FY19E. Better collection efficiency via rural cash flows would reduce GNPA to 8% in FY19E (vs. 9% in FY17). We see an upside of 16% from CMP of Rs.475 from one year point of view.

Year NII (Rscr) Net profit (Rscr) NIM (%) P/BV (x) ROE (%)
FY17 3,790 511 7.6 3.6 6.8
FY18E 4,683 753 8.2 3.2 8.9
FY19E 5,511 1,061 8.4 2.8 11.0

Source: 5Paisa Research

Hero MotoCorp

Hero MotoCorp Limited (Hero), the largest manufacturer of Motorcycles in India, enjoys ~53% market share (Q2FY18 domestic sales volume data). It nearly derives half of its total revenue from rural India.The total volume growth in motorcycle was 13% yoy, and in two-wheeler (2W) was ~11%yoyin Q2FY18. Hero is planning new scooter launches to increase market share in that segment and has outlined Rs25bn capex plan over next 2 years. A satisfactory monsoon, Government’s push to double farm incomes and rising urban incomes are strong triggers that will aid volume growth for the company. Hence, we estimate consolidated revenue and PAT CAGR of 12% and 9% respectively over FY17-19E. Exports comprise only 2.3% of total volumes. Despite Hero being a late entrant into the export market, it plans to double the number of countries that it exports to(from 20 to 40) over next few years.We see an upside of 15% from CMP of Rs.3,804 from one year point of view.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 28,475 16.3 3,377 169.1 22.5 7.5
FY18E 32,224 16.3 3,717 186.1 20.4 6.4
FY19E 35,867 15.8 4,041 202.4 18.8 5.5

Source: 5Paisa Research

Dabur India

Dabur is one of the largest FMCG companies in India. Dabur’s business is divided into four areas i.e. consumer care, foods, retail and international business. It is a likely beneficiary of rural expansion and new product launches. We expect revenue growth to be driven by increasing rural reach and market share gains in juices and toothpaste categories. Dabur plans to penetrate ~60,000 villages (particularly in South India) in near term to capitalize on revival in rural consumption (~45% of revenue). Further, new product launches in hair care, fruit drink and ayurvedic segments are likely to support volume growth.It expects GST to be positive for its portfolio, except for Ayurvedic products where tax levied has risen by 5%. Its recent acquisitions in African market in personal and hair care segments and strengthening online presence with large e-retailers (Amazon) would boost profit. Thus, we expect FY17-19E sales and PAT CAGR of 6.0% and 8.2% respectively.We project an upside of 16% from CMP of Rs.355 from one year point of view.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 7,592 19.9% 1,277 7.3 49.0 12.9
FY18E 7,800 20.3% 1,326 7.5 47.1 11.0
FY19E 8,518 20.3% 1,494 8.5 41.8 9.5

Source: 5Paisa Research

Rallis India

Rallis India, a member of Tata group and a manufacturer of pesticides, fertilizers and fine chemicals, stands to benefit from the launch of ‘Rallis Samrudh Krishi’ by improving the quality and yield of the crops. This is a digital initiative, which will help the company to provide end-to-end Agri Solutions to Indian farmers. The company aims to increase market share of Non-Pesticides portfolio (NPP) going forward. Rallis plans to launch new products in cotton, rice, wheat and hybrid cotton segments. Rallis India also aims to increase its focus on plant growth nutrients to support sustainability of crop yields. The management is optimistic on NPP and expects it to contribute 40% to revenue (currently 31%) over next few years. Also, the company is targeting ~20% yoy increase in sales from Metahelix (subsidiary company) backed by adequate seed supplies. Thereby, we see revenue CAGR of 9.3% over FY17-19E. It is virtually a debt free company, which lends financial stability. We see an upside of 17% from CMP of Rs.274 over a period of one year.

Year Net Sales (Rscr) OPM (%) Adj Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 1,772 14.8% 170 8.8 31.3 4.8
FY18E 1,863 15.4% 178 9.2 29.9 4.4
FY19E 2,117 16.2% 222 11.4 23.9 3.9

Source: 5Paisa Research

Jyothy Laboratories Ltd

Jyothy Laboratories Ltd (JLL), present in soaps and detergents for homecare segment, is expected to rebound post demonetisation and GST. JLL has transitioned from a south based player to a pan India company and has multiple drivers that would enable it to grow its market share in respective categories. JLL’s portfolio of six power brands – Ujala (fabric whitener), Exo (dish bar), Maxo (household insecticides), Henko (fabric detergent), Margo (soaps) and Pril (dish wash) contributed 87% to revenue in FY17. Ujala enjoys ~77% share in niche fabric whitener segment. We believe, owing to JLL’s power brands, newer products (toilet cleaner) and passing of GST benefits, volume growth would get a boost. We expect the company to post revenue CAGR of 7.3% over FY17-19E. We project an upside of 20% from CMP of Rs.388 over a period of one year.

Year Net Sales (Rscr) OPM (%) Net Profit (Rscr) EPS (Rs) PE (x) P/BV (x)
FY17 1,683 15.1% 208 11.5 33.8 6.4
FY18E 1,723 15.5% 164 9.1 42.8 5.6
FY19E 1,936 16.7% 214 11.8 32.8 4.8

Source: 5Paisa Research

Next Article

This Festive Season Should I invest in Gold?

This Festive Season Should I invest in Gold?
23/10/2020

With the pandemic hitting the world economy, the precious metal started inching closer to its record high and then making a dip and rebounding has confused investors if this festive season is the time to invest in Gold. Historically, gold was always considered to be one of the safest options to invest in as this is one such commodity that has given returns even during the crises. And now in the current situation where the world economy is grappling to survive, the yellow metal has again out performed with a spike of around 28% in 2020. The out-performance of this commodity in this year, when even crude-oil witnessed its lowest, is only reaffirming the fact that it is one of the most reliable investment options. And obviously, those who have missed the opportunity, would now be considering increasing the allocation to this asset class. So let's try to analyse if it is really wise to do so. 

What factors were driving the Gold rally?

Generally, its been observed that the investors tend to turn towards Gold when the market crashes, but now even when the markets are rallying, gold continues to inch higher. Various factors such as the fear of politicians’ decision to push through unprecedented stimulus packages, speculations about further government-ordered lockdowns, global central banks' plans to print money faster to increase the spending, and US Dollor's sudden decline against Euro and YEN, have resulted in a rare combination of raising inflation and sluggish growth. In such an uncertain scenario, the investors are looking for safe havens which would not lose value.

Though we did witness the stagnation in the Gold price for around 2-3 years, it made up for the losses in the last 6-12 months. With prices scaling up by over 40%, the investors are reassured that this is one of the most reliable options when they are looking at diversifying their portfolio.

Is it a good time to invest in Gold?

According to market experts, there is no good or bad time to buy gold as it is mainly a long term investment option. Further, here are speculations that gold might hit its another high in a few months to come so it might prove to be a great time to invest. Also, the global uncertainty is a more reliable asset class. Let’s not forget that in the previous two quarters during the uncertainties and fluctuations, gold has helped maintain the stability in the portfolio. Furthermore, one can consider reducing the allocation to the asset class after the end of this period where we are making a leap in the dark. But returns from this yellow metal will be influenced by demand for the commodity, exchange rate between USD and INR, and prices per ounce in USD. So one needs to keep a close eye on all the three factors while making a decisions.

What should be the ideal share of Gold in a portfolio?

While the ideal share of gold in your portfolio should be minimum in between 1%-5%, it could shift higher to around 5% - 15% depending on the nature of your requirements, financial goals and risk appetite. Also, looking at the current scenario, even the minor increase in the proportion of gold in your portfolio can have a great bearing. 

How do I go about with Gold Investment?

There are multiple ways in which you can invest in the Gold. A buyer can choose how he would want to go ahead with the investment by contemplating on the nature of every form to identify which is most comfortable to him. The options to buy gold include:

Digital Gold: This is the most modern and potentially the safest and low-cost way to accumulate gold. Digital gold provides you the flexibility to get the gold converted into a physical form at any given point once you have accumulated at least 0.5 gram gold. The best part about this option is the flexibility in terms of the amount of investment. You can start with as low as Rs50 in this option. You can invest in digital gold though reliable platforms like 5paisa App.

Physical Gold: This is the most traditional way of holding this commodity. It offers you maximum liquidity. However, it also calls for the cost of storage and insurance. This way you can directly invest in coins, jewellery or any such gold accumulation schemes offered by your jeweler to buy a gold product of your choice.

 

Paper Gold: This is another cost effective substitute to the physical gold that includes options like Gold exchange traded funds (ETF) and Sovereign Gold Bonds (SGB). While ETF provides you flexibility of buying and selling it at any point it time through exchanges, you can also start investment in it through SIP. However, in this option you need to buy a minimum of 1 gram gold. On the other hand SGB is issued by the government and does not allow you as much flexibility as the buying window is opened by government for a specified period. 

Continued global uncertainty that has fueled the surge is expected to continue for quite some time. So if at all you are considering diversifying your portfolio to this investment option, this could prove to be a great opportunity to do so. Furthermore, we do not recommend looking at short term returns while buying this commodity. Also, exceeding the recommended limits for the allocation being lured by the unprecedented rally might defeat the purpose. So the key would be to bifurcate your portfolio but allocation to this asset class should ideally not exceed 15% as of now.

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Do You Know sectors to Benefit from Joe Biden’s win?

Benefit from Joe Biden's Win
by Nikita Bhoota 11/11/2020

The markets have turned volatile in advance of the United States (U.S) election and continue to remain volatile post-election. The waves were felt not only in India but across the globe in the equity markets. Joe Biden is to be the 46th President of the U.S and it would certainly lift hopes of certain sectors back in India.

Certain industries that might get affected more than others with Biden’s victory.  Biden plans to spend roughly US $3.2 trillion over the next decade. His plan includes a spending budget of US $750 billion to improve healthcare and the US $750 billion to revamp education as per the media reports. The win of Joe Biden might not make any material difference in the long run, but in the near term.

We have gathered a list of sectors that are likely to benefit from Joe Biden victory as the U.S President.

Metal Stocks and Pharma stocks:

We expect metal stocks to benefit from Biden’s infrastructural push. Metal stocks could gain on the expectation of higher steel export to the U.S for additional infrastructure spending of ~$700-800 bn in the next 10 years.

The Indian Pharma sector is expected to benefit from the Biden win on the back of increased push for generic prescriptions and push to affordable health insurance. Biden plans to protect and strengthen The Affordable Care Act, which ensures a reduction in healthcare costs and access to health insurance for the U.S citizens. This implies more reliance on generic drugs and biosimilars, that would be positive news for Indian Pharma companies. As per the media reports, the U.S imports ~$7 billion worth of formulations from India annually. An increased scope for access to affordable health insurance would also boost the demand for generic drugs.

Electric Vehicle companies:

Biden in his campaign had made it clear that his administration’s focus will be on green energy. As per the media reports, Biden has promised $400 billion in public investment to transition to clean energy, including advanced battery technology and electric vehicles. Therefore, Shares of EV companies and the battery and the solar sectors would benefit from Biden’s win. Biden could also ease concerns about the trade war with China leading to a positive impact on global trade.

Real Estate, Financial Institutions:

A Biden win would mean a larger stimulus followed by additional means to improve healthcare access and other social welfare programs. Sectors that are likely to get impacted include real estate, financial institutions, student loans, etc.

Chemicals, Cement and IT sector

The Chemical sector which competes with China might have a positive impact as the U.S can take a tough stand against China. Similarly, the infrastructure push by Biden will benefit the cement industry.

The market experts have an opinion that visa restrictions for software engineers sent by Indian IT companies could ease. Trump has tightened norms for H-1B visas, mostly used by software services providers to send engineers for on-site work. That prompted IT companies to ramp up hiring local talent in the past three years, increasing costs in the market that contributes 50-65% of the revenue for India’s five largest IT firms. A Biden presidency is, however, seen to be less hostile to immigrants.

Conclusion:

U.S elections are likely to lead to short-term market swings that will be insignificant over the longer run.  Therefore, we recommend the investors to stick to their long-term strategy and stay focused on individual stocks.

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10 key parameters for analysing your trades

10 key parameters for analysing your trades
17/11/2020

As the share market is highly volatile, investors rely on some variables which can help them trade successfully. These variables are flexible as they change according to the condition of the share market and adapt themselves accordingly.

Every investor must consider using the given below variables when logging their trades as these can help them to avoid losses and better analyze their mistakes to make successful share market strategies.