Experts advised staying in the counter for long-term gains given the increased focus on the digital space and lack of competion for the firm.
Cloud communication services provider Route
Mobile witnessed strong buying demand as the stock listed with much
higher-than-expected premium on September 21.
The stock after opening at Rs 708 on the BSE
touched an intraday high of Rs 735, rising 110 percent over the issue price of
Rs 350 per share. The trading volumes on both exchanges stood at 2.81 crore
equity shares at the time of witing this copy, which was much higher than
its total issue size of 1.71 crore equity shares.
Given the leadership position in cloud
communication service, deepened relations with mobile network operators (MNOs),
broadened product and service portfolio over the years through strategic
acquisitions and being the only listed peer in this space, all experts advised
staying invested in the company with a long-term horizon.
"The sector is very promising. With growing
technology and almost every industry becoming an IT-enabled enterprise, there
is good potential for this stock as the sector has not yet saturated and is
still in a growing stage. Thus a great potential for growth can be
harnessed," Gaurav Garg, Head of Research at CapitalVia Global Research
told Moneycontrol.
Keshav Lahoti - Associate Equity Analyst at Angel
Broking also recommended staying invested in the company for the long-term.
"We are positive on the future outlook for the
industry as well as the company. Route Mobile has a robust business model and
consistent financial track record. It also has a diversified and global client
base across industries which provides us further comfort on its business.
Unlike many other businesses, COVID-19 has led to better growth prospects for
the company given increased adoption of digital technologies," he
reasoned.
Incorporated in 2004, Mumbai-headquartered Route
Mobile is the leading cloud–communication platform provider, catering to
enterprises, over-the-top (OTT) players and mobile network operators (MNOs).
Its product portfolio includes smart solutions in messaging, voice, email and
SMS filtering, analytics and monetization.
It is also one of the most prominent and largest
CPaaS (cloud communication platform as a service) players in the world,
especially in Asia, Africa & the Middle East. The company has served over
30,150 clients, since inception and has access to over 800 networks across the
globe, over 255 direct connections to telecom operators and over 3,000 active
monthly billable clients.
For FY18-20, revenue has grown at a CAGR of 38
percent thanks to its association with marquee clients.
85 percent of the revenue is generated from export
markets like Africa, Europe, the Middle East and North America. The company
uses a prepaid business model where the client pays upfront, which helps
in reducing overall working capital cycle.
"I would suggest holding on to the stock on
the listing day even after considering a healthy listing premium. Route Mobile
being a market leader in cloud-communication is expected to be one of the
biggest beneficiaries of the increasing digitalisation drive in India
post-COVID," Prashanth Tapse, AVP Research at Mehta Equities said.
Route Mobile does not have a directly comparable
listed peer in India. "The company will become the second only firm in the
larger mobile communication services after Affle India which trades at PE 100x.
With growing internet penetration and business models adopting a digital
platform with cloud services being the need of the hour, we believe investors
should tap this opportunity and hold for a multibagger story for 2-3
years," Tapse added.
Want to Buy stock on Listing Day?
If someone is interested to buy the stock on
listing day itself, he/she should buy the stock only below Rs 500 levels
given the expected growth in the sector and the company, experts feel.
"Adding on the listing day would be suggested
only if the listing premium is below 50 percent to allotment price i.e. below
Rs 500 per share," said Tapse.
Manali Bhatia, Head-Research at Rudra Shares &
Stock Brokers also feels if someone wants to buy on listing day then fresh
buying at the levels of Rs 450-500 is suggested for long-term.
"Buying can be done if stock is available at
40-50 percent above issue price as company's established presence in all major
geographies provides it an opportunity to leverage the growth in the cloud
communications space," said Astha Jain, Senior Research Analyst at Hem
Securities who believes that one should hold partial quantity for the
long-term and book profits partially.
Outlook on the stock and sector
"Route Mobile provides a communication channel
to enable two-factor authentication. Thus, as the digital transactions would
grow, the two-factor authentication would become stronger. It has marquee
customers, the largest being Google and FB the second largest. Moreover, it has
healthy financials, negligible debt, impressive ratios & RONW at 25.58
percent and positive operating cash flow over FY18-20. Though the valuations
are decent at current levels, its presence in niche IT segment along with
clients across different sectors (such as social media, banking and financial
services, retail, logistics) makes investing in stock worthy for long
term," Manali Bhatia said.
Astha Jain said, "With company intending to
capitalise on the growth opportunity in cloud communications space and
endeavour to become a one-stop communications solution provider to enterprise
clients and MNOs, the future prospects of the company look strong."
Disclaimer: The views and investment tips expressed by
investment expert on SD. Solutionsare his own and not that of the website or
its management. SD. Solutionsadvises users to check with certified experts
before taking any investment decisions.
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