Analyst Research Report Snapshot

Title:

Redington (I) Ltd. (REDI) - Qtr. Update - Dated - October 07, 2013

Price:

$46.00

Provider:

Axis Capital Limited

Date:

08 Nov 2013

Pages:

5

Type:

AcrobatPDF

Companies referenced:

REDI.NS

Available for Immediate Download
Summary:

Despite PC market recording 8% YoY decline globally, Redington delivered revenue growth of 14% YoY led by strong momentum in international business (58% of revenue). Management expects H2FY14 to be better than H1FY14 (Q4 is a seasonally strong quarter). Margin is likely to remain steady or improve from current levels of 2.4% in Q2FY14 over the coming quarters. In FY15, we expect revenue to be driven by  Higher growth from Apple products in India  Samsung and Arena in International markets Apple continues to be strong in India and Samsung continues to do well in Africa. Management also indicated it is in negotiations with new vendors and announcements are likely in the next quarter. Maintain BUY We estimate ~11% CAGR in revenue over FY13-15E mainly driven by Apple products and new distribution tie-ups. We maintain our FY14/FY15 EPS estimates of Rs 9/ Rs 10. Our TP of Rs 100 (10x FY15E EPS) implies upside of 59% from CMP of Rs 63. The stock trades at 7x FY14E EPS and 6x FY15E EPS. Domestic operations (revenue: 42%, PBIT: 58%): Non-IT continues to drive growth Non-IT business (29% of revenue) continues to witness growth largely driven by Apple products. Blackberry sales had a strong quarter selling ~73,000 units vs. 67,000 units in Q1FY14. Apple iphone has grown QoQ and (upwards of 100,000 units) and continues to do well. PBIT margin improved YoY to 3.31% (vs. 3.26% in Q2FY13). Management is in talks with a couple of global vendors, of which one is close to finalization. International operations (revenue: 58%, PBIT: 42%) Redington reported strong 21% YoY growth in revenue with PBIT margin of 1.74% (1.67% in Q1FY14 and 1.8% in Q2FY13). The segment contributed 83% of incremental revenue during the quarter. Redington is the no. 1 distributor in West Africa and continues to do well. Management is focusing on building this portfolio in the Middle-East. Also, the company is in advance talks with one or two tier 2 vendors for tie-ups. Regards, Priya Rohira (Executive Director – IT & Telecom) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1104 Vishal Desai (AVP – IT) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1119

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