13 Dec , 2022 By : Monika Singh
Landmark Cars’ IPO opened today and was subscribed 17% at the end of Day 1 bidding. The company’s employees demonstrated the highest interest, oversubscribing the issue at 1.2 times of their quota. The price band is set at Rs 481-506, and the company seeks to raise Rs 552 crore at the upper end of the price band. The automotive dealer’s public issue consists of fresh equity shares worth Rs 150 crore as well as an offer for sale up to Rs 402 crore. The IPO is commanding a grey market premium (GMP) of Rs 20 per share.
Based on FY22 earnings, the company is valued at 30.3x P/E, 12.7x EV/EBITDA and 0.7x EV/Sales. Over the next couple of years, the premium market segment is expected to grow at a CAGR of 10-12% while the luxury vehicle segment is also expected to grow at a CAGR of 14-16%. Landmark is likely to report healthy numbers over the next couple of years led by strong growth in the premium car segment. In view of healthy financials, strong presence, leadership position, premium automotive retail business and valuation comfort, we recommend a ‘SUBSCRIBE’ to the issue.
Landmark intends to focus on expanding their business in high growth segments like premium and luxury passenger vehicles including UVs as well as electric vehicles. They aim to leverage their relationships with the OEMs to expand geographically to achieve economies of scale. The company has competition from unorganized market and unlisted players. A significant risk could be a change in dealership terms & agency agreements from OEMs
Out of total revenue the company earned 80% from sales of vehicles with an EBITDA margin of 2.87% and remaining 20% from the after sales service and spare parts segment with an EBITDA margin of 18.19% in FY2022. Landmark Cars’ ROE and ROCE stood at 26.66% and 18.86% in FY2022. The company’s debt to equity ratio stood at 1.48x as of June 2022, post-IPO it would become 1.03x. On the valuation front, the company is available at 28.30x PE for FY22. The company does not have any listed peers in the similar business. We recommend avoiding the issue.
Landmark cars limited has a leading automotive dealership for major OEMs with strong focus on high growth segment and growing presence in after-sales segment leading predictable growth in revenue and comprehensive business model with robust business process leveraging technological innovation and digitalization. At the upper price band Landmark cars limited is trading at P/E of 31.34x with a market cap of Rs 20,032 million post issue of equity shares and return on net worth of 26.5%. We believe Landmark cars limited is fairly priced and recommend a “Subscribe – Long term” rating to the IPO.
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