The stock is trading at a Price to Earnings (PE) ratio of 6.7 times its FY23 estimated earnings compared to an average of 8.5 times since its listing in September 2018, according to analysts.
“IRCON’s OFS price is very attractive in terms of valuations,” said Vishal Periwal, analyst, IDBI Capital. “At the OFS price, the stock offers a dividend yield of 6% for FY22 and 7% for FY23 estimates. “
The government plans to sell up to 7.52 crore shares or 16% stake in IRCON through the OFS to raise about Rs 662 crore. After the stake sale, the government’s holding in the company will fall to 73%.
The stock, which is currently trading just above its book value, has been maintaining a good dividend payout history of 46%. The stock declined 7% on Wednesday to close at Rs 91.10.
IRCON shares, an underperformer in the recent rally, have shed 6% in the past year even as many stocks more than doubled. The stock has fallen 4.2% since its IPO in September 2018. The company had priced the stock at Rs 95 (adjusted for stock split) in the IPO.
IRCON’s order book as on December 2020 was Rs 32,800 crore which is equal to 7 times its trailing 12 months revenue. Almost 94% of its order book is from the Railways.
“The catalyst for stock performance is execution uptick and asset monetization with IRCON has equity investment of Rs 1,200 crore in roads and Railway joint ventures,” said Periwal.
