I typically avoid looking at IPOs but I do visit the companies which come out with IPOs after few years to see what they have done and how the stock prices have reacted. In this post, I will analyze Precision Camshaft and GNA Axles. Precision Camshafts came out with IPO in January 2016 while GNA Axles came out with IPO in September 2016. Following table summarizes the IPO details:
The above table shows that in one company, investors have gained 165% in around 1.5 years and in the other, investors have lost 45% in around 2.25 years. The reason for more enthusiasm in GNA Axles is growth in recent times while flat revenue growth for Precision Camshafts since last two years. In 4 years between 2012 and 2016, Precision Camshafts average revenue (average of 3 years) grew from 260 Crore to 471.5 Crore while that of GNA Axles revenue grew from 349 Crore to 482.6 Crore. The only problem is that GNA this year has increased revenue as well as profits while Precision's revenue topped in 2015 and is decreasing since last 3 years now.
I personally feel that some premium for GNA Axles is justified but such large variation of valuation just due to growth in recent years seems far fetched. If you have to invest right now, I would go with Precision Camshafts.
| GNA Axles | Precision Camshafts | |
|---|---|---|
| Issue Price | 207 | 186 |
| P/E @Listing | 17.1 | 22.3 |
| Current Price | 550 | 103 |
| P/E Now | 29.1 | 24 |
| Gain/Loss | 165% | -45% |
| Average Operating Cash Flow in 3 Years | 37 Crore | 83 Crore |
| Enterprise Value (Market Cap + Debt) | 1297 (1180 + 117) | 1090 (980 + 110) |
| P/B Now | 3.57 | 1.75 |
The above table shows that in one company, investors have gained 165% in around 1.5 years and in the other, investors have lost 45% in around 2.25 years. The reason for more enthusiasm in GNA Axles is growth in recent times while flat revenue growth for Precision Camshafts since last two years. In 4 years between 2012 and 2016, Precision Camshafts average revenue (average of 3 years) grew from 260 Crore to 471.5 Crore while that of GNA Axles revenue grew from 349 Crore to 482.6 Crore. The only problem is that GNA this year has increased revenue as well as profits while Precision's revenue topped in 2015 and is decreasing since last 3 years now.
I personally feel that some premium for GNA Axles is justified but such large variation of valuation just due to growth in recent years seems far fetched. If you have to invest right now, I would go with Precision Camshafts.
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1 comment:
i always look for chinmay to write something on blog.following this blog from last many years.this blog never change methodology with market behavior
keep it up chinmay
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sonia kapur
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