DreamFolks Services, airport lounge services provider, saw a dream entry to stock markets with shares listing at a premium of 56 percent and exceeding estimates. However, now some believe it is time to book profits.
The initial public offering (IPO) had generated strong interest thanks to DreamFolk’s dominant position and lack of competition with the firm having about 95 percent market share.
Amarjeet Maurya, assistant vice president of mid caps at Angel One, who had a ‘subscribe’ rating ahead of the IPO, said the stock is now trading at 150.46x FY22 price to earnings (PE) which leaves little room for upside. He added that investors who got shares should book profits now.
Apparently, some investors have started booking profits. The stock now trades about five percent lower than the listing price but still maintains most of its gains.
Analysts pointed out that it is a monopoly business and hence commanded a high price for the IPO. Core profit margins fell in FY22 despite a rise in air travel, they highlighted. But, with India planning over 200 airports in three to four years, there is scope for growth as well as the risk of disruption and competition.
However, Ketan Sonalkar, a market regulator-registered investment advisor and head of research at Univestm, concurred with Maurya that it is better to take away listing gains from the table and track performance rather than have a long-term perspective.
Meanwhile, the company said its revenue jumped over six-fold year on year during June quarter. Consolidated net profits came in at Rs 13.43 crore, compared to a loss of Rs 1.38 crore a year ago.
The company’s superb listing, and a strong earnings update, points towards positive market sentiments, bright prospects, and a phenomenal response from investors. The Indian aviation industry is on the cusp of exponential growth in the next two decades, said Santosh Meena, head of research at Swastika Investmart, due to its demographic advantages, potential growth in middle-class income, rising business travel, reduced cost of air travel, and increased travel in tier two and three destinations.
The issue was entirely an offer for sale by shareholders in which the promoters also diluted their stake. Meena said with a sharp jump the stock is richly valued now. “Those who applied for listing gains can maintain a stop loss of Rs 457. Only long-term investors with a moderate to high-risk appetite should enter post-listing,” he added.
Manoj Dalmia, founder and director, Proficient Equities, said: "Investors can book some profit if looking for gains or for long or mid term they can wait and keep holding but with a stop loss. Other investors who are looking to buy can wait for some closing in the green."
Ravi Singhal, chief executive of GCL, said: "Long-term investors should keep investing with an SL of 350 and a TG of 700 or more in the next year."
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