Electronic sub-systems and cable harnesses manufacturer DCX Systems is likely to make investors happy ta its market debut on November 10, as analysts largely expect a listing premium of around 35-40 percent over its issue price of Rs 207. The expected listing premium is largely similar to the grey market premium.
Positive equity market environment, reasonable valuations, healthy demand from investors for the initial public offering (IPO), rising demand for the aerospace and defence segments with consistent capex by the government under the Atmanirbhar Bharat initiative, and strong financial performance are key reasons for the expected strong listing premium, analysts said.
According to them, DCX Systems’ shares were trading at 36-41 percent premium in the grey market at the time of writing this article. The grey market, an unofficial trading platform, is generally used by investors to gauge the expected listing price of any IPO.
"Backed by a supportive secondary market and fancy sector demand, DCX Systems is signalling a strong debut with a healthy premium on its issue price of Rs 207 per share. Considering the excellent response from investors for the IPO, we assume listing would be around Rs 280-290 levels, which translates to about 40 percent premium at the upper end of the IPO," Prashanth Tapse, Senior VP-Research at Mehta Equities, said.
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Astha Jain, Senior Research Analyst at Hem Securities, also expects DCX Systems to list at 36-40 percent premium to the issue price.
The IPO of DCX Systems received stellar response from investors. It was oversubscribed 69.79 times, with retail investors bidding for 61.77 times the allocated quota, non-institutional investors 43.97 times, and the reserved portion of qualified institutional buyers (QIBs) being oversubscribed 84.32 times.
The preferred Indian offset player for the defence and aerospace industry raised Rs 500 crore via the public issue. The price band for the offer was Rs 197-207 per share.
"The listing of DCX Systems is expected to be positive. The company is a leading player in electronic sub-systems. The IPO was offered at a reasonable valuation. The company will benefit from the initiatives taken by the government towards the goal of Atmanirbhar Bharat," Narendra Solanki, Head-Equity Research at Anand Rathi Shares & Stock Brokers, said.
DCX Systems is primarily engaged in systems integration and manufacturing a comprehensive array of cables and wire harness assemblies, and is also involved in kitting.
It has been a preferred Indian Offset Partner (IOP) for foreign original equipment manufacturers (OEMs) for executing aerospace and defence manufacturing projects.
Its product portfolio is backed by its capabilities in systems integration and manufacturing, which has helped its order book grow from Rs 1,941.31 crore as of March 2020, to Rs 2,369 crore as of March 2022. As of June 2022, the order book comprised 42 orders worth Rs 2,563.63 crore, of projects to be executed over the financial years 2023 to 2025.
Its revenue from operations grew at a compounded annual growth rate (CAGR) of 56.64 percent during FY20-FY22 to Rs 1,102.27 crore, while profit more than doubled to Rs 65.6 crore in FY22, from Rs 29.5 crore in FY21.
The operating performance was also robust, with earnings before interest, taxes, depreciation and amortisation (EBITDA) rising significantly to Rs 66.99 crore in FY22, from Rs 10 crore in FY21, and margin expanding to 6.08 percent from 1.57 percent in the same period.
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