Stanley Lifestyles Ltd (SLL), the maker and retailer of luxury furniture, listed on the bourses today at ₹499. The issue price at the upper band was ₹369. This translates to a listing gain of 35.2 per cent. This listing gain can be viewed in the context of an overall bullish sentiment prevailing in the market, marked by Nifty making all-time highs this week.

The shares of SLL after opening at ₹499 on BSE, had made a high of ₹510 in the first hour itself, before cooling down to a low of ₹470.25. The stock bounced from there and closed at ₹474 for the day.

In our analysis of the IPO published in our bl.portfolio edition dated June 23, 2024 , we had recommended that investors wait and watch for a couple of quarters, before taking the call to enter the stock.

Though SLL is well poised to capitalise on its vertically integrated operations, its market leadership and tailwinds such as the luxury housing market upcycle and the Government’s push towards import substitution, the stock at its issue price of ₹369 was richly valued at 84 times annualised 9M FY24 EPS.

At today’s close of ₹474, the PE ratio works out to 107.9 times, which more than adequately factors the future business prospects in the price.

However, a flat revenue growth expected for FY24, and risks represented by dependence on the long-term sustainability of the luxury housing market cycle, inherent business risks (such as revenue loss due to relocation of stores in past year) and concentration of revenue to the south of the country do not seem to be priced in.

In our IPO analysis stated above, we had iterated to wait and watch if the company posts numbers that can justify such a lofty valuation in its upcoming earnings releases. We reiterate the same now for investors looking to enter the stock. And for investors who have got allotment in the IPO, we recommend them to lock in the gains, as the risk-reward is even more unfavourable now than it was pre-listing.

For more insights, check out our earlier analysis here.

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