Energypac IPO is one of the trending elements in the Dhaka Stock Exchange. As the IPO application is going on, it is very important to keep yourself up to date with this recent IPO. In this article, we will elaborate on a few areas to focus on before applying for Energypac IPO. From this analysis you will have an idea about the overall situation of the stock and what are the components to consider before applying for the IPO. Let’s get into the details without delay.
If we look at the background of Energypac, we can see that they have a good foothold in the market. Since its emergence in 1995, Energypac has grown to be one of the prominent figures in the industry. Their scope of operation includes technology, engineering, construction, power and energy sector.
This multinational company is currently operating in 16+ countries and has completed over 500+ projects worldwide and has a resounding number of employees working under the umbrella of Energypac.
If we look at the overall financial performance of the organization for the past couple of years, we will be able to see a reflection of growth. From the stock market, the organization is looking forward to withdrawing the capital of BDT 150 Crore. The offer price of this IPO is BDT 31 and is finalized based on the book building method. The market lot for the IPO is 200. With a credit rating of AA2, Energypac looks very promising for investors belonging to different walks of life.
RIL Invest Rating
We consider the RIL Invest Rating to be one of the essential indicators that determine the overall quality of the IPO. In the following, we will breakdown the elements we considered in terms of rating the IPO.
Quality of Management
Quality of management body is one of the very important components to consider. The performance of an IPO depends a lot on the quality of the management body. In simple words, when applying for an IPO, knowing about the directors of the company is not a must-have, instead, it is good to have considering there are other more important factors to consider before applying for an IPO. In the RIL invest rating, we analyze the quality of the management and give a rating based on that. Looking at the management body, we think Energypac deserves a 5 on 5 ratings because they have skilled and competent directors.
In RIL rating, we also consider the financial performance of the organization. Because from a trader’s perspective, it is important to understand the fiscal year earning of the company. The increasing trend of earning will reflect on the EPS, bonus share and profit share of the company in the future. An upward graph of the yearly earning indicates a company with a healthy financial condition. This is very important for any organization to sustain in the stock market and benefit the shareholders in the long run.
If we look at the overall financial performance of Energypac, we can see that the organization relies highly on sales and profitability that is generated from the sales. As a result, it is important to consider the track record of the organization in terms of the number of sales they have achieved over the years. Considering the sales and profitability of the organization, we can give Energypac IPO a rating of 2 out of 5 because the performance of the organization is moderate.
Industry and Business Growth
To determine the quality of an IPO, it is essential to cross-check the performance and possibility of the relevant industry. Energypac has a long list of competitors in all the sectors of its operation. In addition to that, all the sectors have a promising future as well. In general, an industry with high competition tends to harness development and growth due to the competition. So, we can concur that in terms of industry and business growth, the sectors are auspicious. Therefore, we gave Energypac IPO a rating of 3 out of 5 due to the possibility and growth opportunity of the industry.
Possible Use of IPO
Before applying for IPO, it is essential to know what the areas of the use of IPO are. Different organizations have different reasons for collecting the capital from IPO. How the performance of the IPO will have to be considered as well. If we look at the Energypac IPO, the possible reason for this company to gather capital through IPO will be used in Capex and around 33% of the money will be used in reducing the liabilities the company has. Therefore, it gets a rating of 3 out of 5 for the possible use of the IPO.
Measuring Business Risk
The related business risk is one of the components to consider before making any decision regarding an IPO. The possibility and future scope of the IPO depend much on the related business and its risk. An organization with higher business risk is prone to have a risky IPO performance as well. In our RIL, we keep this component in consideration as well. Looking at the market and industry of Energypac, we can see a trend of risk. The very nature and dynamic of the market are very risky.
The number competition and their capacity is also a factor to consider to measure the business risk. From the overall analysis of the competition and the market condition, we can say that the business risk for the IPO is quite high. Due to the high business risk, the stock prices can fluctuate as well. Therefore, we can only give Energypac IPO a rating of 2 out of 5 for the business risk.
So, from the overall calculation, we can see that the total RIL rating for Energypac IPO is 3 out of 5. Thus this IPO can be considered as an investable IPO.
Performance Analysis of 5 Years
Looking at the overall financial performance of the organization for the past 5 years will shed essential light on the overall condition of Energypac. We will consider the performance that is connected with the share of the Energypac.
- Asset: The overall growth of asset during the past 5 years was 39%. It shows steady growth in the overall asset development of Energypac.
- Equity: Equity is a vital indicator for the financial performance of an organization. If we look at the 5 years performance of Energypac, we can see an average growth of 9% over the past 5 years. There is a room for improvement for Energypac in this area and it will be a necessity in the future.
- Sales: Increase of sales is essential for the positive performance of any organization. It is an indication of the growth and sustainability of companies. Looking at the numbers of Energypac, we can see they have sales growth of 46% over the past 5 years on average. The growth is satisfactory for Energypac and it can be considered as one of key indicator for Energypac.
- Profitability and Cash Flow: The financial performance of Energypac shows they have a smooth cash flow and they have shared profits before as well. On top of that, the cash flow is also in good condition. This performance is also a positive factor for Energypac.
- Lesser Capability of Return: Along with the positive sides, there are few drawbacks for Energypac as well. Looking at the ROE, ROA and ROIC it shows a lesser capability of return in these areas. If improvement can be done in these areas then Energypac can ensure a better performance in the long run.
The industry analysis is an indicator of the possible growth and prosperity of Energypac. Many components show the industry is going through fierce competition. As there is a chance of increased profit, thus the threat of new entrants in the industry is relatively high. Plus, due to the available options, the customers have a higher bargaining power as well. That makes the competition even more interesting. With the available options, they can easily switch suppliers if they want to. In terms of competition, there are already few companies that are functioning actively in the market. And these organization are expanding the scope of operation as well.
The amount of competition in the market also gives the suppliers an advantage to bargain. As they also have the available option, thus they have some ground to bargain as well. An overall analysis of the industry indicates that it is a very competitive market and it creates a lot of opportunities in the market as well. This is a good indication for the investors because the organization will take measures to keep up with the competition they are facing.
As there is a lot of companies operating in the same market, thus it can be hard for Energypac to combat with the rest and ensure growth in the market. Along with that, the expense behind the directors are quite high for Energypac. This will make it longer for the organization to gain financial proficiency quickly. It will take more time for the organization to ensure handsome profitability covering the expenses of the directors.
On top of that, the profit margin is also very low because of the available competition, which can make it difficult for the organization to sustain in the industry with good profitability. Plus, as there is entry barrier in the auto mobile industry so the long term prospect of the organization can be harmed. Along with that, the difference in the bank interest rate the expense of the company can increase and hinder the growth of profitability. The changes in the local and global policies may affect the long time growth of the company.
These are the overall risk factors that investors need to consider before applying for the IPO of Energypac.
It is important to consider the opinions of analysts to have a clear idea of the overall situation of the company. This will help us to broaden our perspective on the share and make intelligent decisions. Let’s have a look at the key and popular opinion of the analyst’s on the financial condition of the organization.
In the balance sheet of Energypac, the amount of non-growth asset is very high. This does not give any direct benefit to the organization. Plus, the working capital has a moderate amount of cash and cash equivalent asset. This indicates that the organization has a moderate amount of liquidity.
Comparing the cash balance of 2018 and 2019, currently, the organization has more cash balance than the current liabilities. This can be considered as one of the positive factors for Energypac as well. However, in the past two years, the company has an increasing amount of internal debt that needs to be considered by the investor before taking any investment decisions.
These are the analyst’s take that has to be considered before any investor makes their mind for applying for the IPO of Energypac.
From the overall discussion, we can summarize the following points:
- The IPO of Energypac is investable.
- There are a few risk factors due to the competition and financial performance of the organization.
- The growth in profitability indicates chances of growth in future as well.
Thus, if an investor is planning to apply for the IPO of Energypac, they can go for it, considering all the variables.
We hope the analysis will help you to make a right decision in the near future. If you enjoyed reading our article, have a look at our blog and other insights as well.