At the price band of Rs540-550, the issue is priced at 46-47x price earnings (PE) ratio for FY2015 and 28x EV/EBIDTA for FY2015 (25x on H1FY2016 annualized EBIDTA). Though the valuations appear stretched on absolute basis, the stock could command premium due to its strong brand image, extensive distribution and a proven track record in a niche and fast growing segment.
Moreover, the valuations are at a discount to related (though not strictly comparative) hospital/healthcare companies (Apollo Hospitals at 25x EV/EBITDA and Fortis Healthcare at 58x EV/EBITDA) that have a relatively more capital intensive model. On the other hand, DLP is a cash rich company with strong free cash flows and all its organic expansions can be funded through internal accruals.
Verdict : Buy the stock for listing gains.
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