1
Aug 24, 2016
Redington (India) Ltd
Technology-Design, Mfg & Distribution-Technology Distributors
Redington (India) Ltd
India Research - Stock Broking
BUY
Bloomberg Code: REDI IN
Recommendation (Rs.)
CMP (as on Aug 23, 2016) 106
Target Price 136
Upside (%) 28
Stock Information
Mkt Cap (Rs.mn/US$ mn) 42380 / 632
52-wk High/Low (Rs.) 132 / 95
3M Avg. daily volume (mn) 0.9
Beta (x) 0.8
Sensex/Nifty 28077 / 8667
O/S Shares(mn) 399.8
Face Value (Rs.) 2.0
Shareholding Pattern (%)
Promoters 13.3
FIIs 34.5
DIIs 24.1
Others 28.0
Stock Performance (%)
1M 3M 6M 12M
Absolute 5 (5) 5 (10)
Relative to Sensex 4 (14) (11) (12)
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Shamshad Sajitha Gunturi
040 - 3321 6271
shamshad.sajitha@karvy.com
Distributing IT & Mobile Products of Top Global Brands
Penetrating into different geographies with Mergers and Acquisitions:
Redington India is the brand behind the top global brands like Hewlett Packard,
Toshiba, IBM, Cisco, Lenovo, Acer, Apple, Blackberry, Xiaomi, HTC and Motorola.
The technology distributor with strong partnerships is expanding its horizons
into the Middle East, Africa and Turkey (MEAT), Srilanka, Bangladesh and CIS
countries. The new acquisitions and partnerships would gain operational synergies
and provide inorganic growth in the new regions i.e. Acquired 80% of Turkey based
leading Oracle distributor linkplus. The end-to-end supply chain rm has increased
it’s smart phone distribution to new markets like UAE and Nigeria. The IT and
Telecom industries are now penetrating into small towns and villages, the rm has
vertical businesses with pan india presence and would likely to become the largest
contributor serving not only new product launches but also for the sustenance of
growth of brands in the Indian market and extending its wings to other geographies.
Strong fundamentals of the emerging economy aid to kick start the new
phase of growth and development to the industries: The company has
posted a CAGR of 13.7% for FY12-FY16. We are estimating a YoY growth of 12.8%
for both FY17E and FY18E in the top line. The total revenues are likely to grow to
Rs.399709 Mn and Rs.450948 Mn for FY17E and FY18E respectively. The prudent
monetary policies of RBI, the implementation of the unied tax system (GST), the
incremental scal and structural reforms undertaken by the government, would aid
Redington to grow in the IT and ITeS industry with 3PL services. It is the neutral
service provider and they are creating a cultural and economic transformation in
the emerging markets with their technology distribution, hardware support services,
cloud, solutions space, ware housing and Logistics.
Valuation and Outlook
At CMP of Rs.106, Redington is currently trading at P/E of 7.5x on FY18E EPS of
14.3.We value the company at P/E of 9.5x of FY18E EPS Rs.14.3 for the target of
Rs.136.We initiate coverage on Redington with a “BUY” rating for a target price of
Rs.136 representing an upside potential of 28% in 12-15 months period.
Key Risks
1) Inventory risk and Credit risk. 2) Geo-Political risk.
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Net Sales 279449 315549 354296 399709 450948
EBITDA 6594 6941 7709 9388 10709
EBITDA Margin (%) 2.4 2.2 2.2 2.3 2.4
Net Prot 3366 3865 4262 4980 5703
EPS (Rs.) 8.4 9.7 10.7 12.5 14.3
RoE (%) 16.7 16.3 15.3 15.6 15.5
PE (x) 12.5 10.9 10.0 8.6 7.5
Source: Company, Karvy Research; *Represents multiples for FY14, FY15 & FY16 are based on historic market price
80
90
100
110
120
Jul-15
Aug -15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Redington (India) Ltd
Sensex
2
Aug 24, 2016
Redington (India) Ltd
Company Background
Redington India has commenced its business in 1993 and
has its corporate oce in Chennai with 42 sales locations
across India. It has core businesses of Technology distribution,
Hardware support services, warehousing and logistics. It has
87 sales oces, 114 warehouses, 96 own service centers
and 264 partner centers. It has emerged as a leading supply
chain solutions provider for global brands in the IT and
non-IT (Consumer and Digital Lifestyle products). Their
expertise lies in end-to-end supply chain management
complete with the rendering of logistics, after-sales support
and nancial services. They are authorized partners for
leading brands like Hewlett Packard, Toshiba, IBM, Hitachi,
EMC, Net App, Brocade, Cisco, Lenovo, Fujitsu, Acer,
Apple, Blackberry, HTC and Motorola. Remote Infrastructure
Management practice, is backed by a 24*7 network operation
centre. Redington’s expansion into logistics services has
been enabled by the establishment of Automated Distribution
Centers (ADCs) and a foray into Third Party Logistics (3PLs).
TUV NORD has awarded ISO 9001 2008 Certication. A team
of over 1400 highly skilled professionals are on the payrolls.
Exhibit 2: Shareholding Pattern (%)
Source: BSE, Karvy Research
Exhibit 3: Revenue Segmentation (%)
Source: Company, Karvy Research
Balance sheet (Rs. Mn)
FY16 FY17E FY18E
Total Assets 103501 122312 140100
Net Fixed assets 2347 2486 2660
Current assets 96751 115260 132738
Other assets 4402 4566 4702
Total Liabilities 103501 122312 140100
Networth 27874 31954 36757
Debt 0 0 0
Current Liabilities 72456 86947 99671
Other liabilities 3171 3411 3671
Balance Sheet Ratios
RoE (%) 15.3 15.6 15.5
RoCE (%) 13.7 14.1 14.1
Net Debt/Equity 0.6 0.6 0.5
Equity/Total Assets 0.3 0.3 0.3
P/BV (x) 1.5 1.3 1.2
Source: Company, Karvy Research
Cash Flow (Rs. Mn)
FY16 FY17E FY18E
PBT 5941 6982 7903
Depreciation 433 477 538
Interest (net) 1797 2404 2804
Ta x (1814) (1767) (1944)
Changes in WC (7778) (5577) (5695)
CF from Operations (1421) 2518 3607
Capex (573) (615) (681)
Others (67) 0 0
CF from Investing (641) (615) (681)
Change in Debt 4819 3728 4348
Interest (1848) (2404) (2804)
Dividends (900) (900) (900)
Others (55) 0 0
CF from Financing 2016 424 644
Change in Cash (46) 2327 3570
Source: Company, Karvy Research
Company Financial Snapshot (Y/E Mar)
Profit & Loss (Rs. Mn)
FY16 FY17E FY18E
Net sales 354296 399709 450948
Optg. Exp 12864 13991 15666
EBITDA 7709 9388 10709
Depreciation 433 477 538
Interest 1797 2404 2804
Other Income 467 480 541
PBT 5941 6982 7903
Ta x 1464 1767 1944
Adj. PAT 4262 4980 5703
Profit & Loss Ratios
EBITDA margin (%) 2.2 2.3 2.4
Net margin (%) 1.2 1.2 1.3
P/E (x) 10.0 8.6 7.5
EV/EBITDA (x) 7.7 6.4 5.6
Dividend yield (%) 2.0 2.0 2.0
Source: Company, Karvy Research
Promoters
13.3%
FIIs
34.5%
DIIs
24.1%
Others
28.0%
IT
75.0%
Services
2.0%
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Aug 24, 2016
Redington (India) Ltd
Information Technology Industry:
India is the largest exporter of IT. IT has changed the image of India in front of the world from a slow moving bureaucratic
economy to a land of innovation.
Central and State government agencies realized the immense potential that the IT sector holds and handed out sops and
incentives continuously for its promotion that resulted in the formation and proliferation of IT hubs across the country.
Bangalore is the undisputed leader of the IT growth story in India, other cities such as Chennai, Hyderabad, Pune and Delhi
NCR also emerged and established themselves as IT centres.
The industry employs about 10 Mn workforce. India is the world's largest Information Technology destination, accounting for
approximately around 67 per cent of the US$124-130 Bn market. India provides cost competitiveness in IT services, which is
3-4 times cheaper comparing to USA, which is its Unique Selling Proposition (USP). India is gaining prominence in terms of
intellectual capital with several global IT rms setting up their innovation centres in India.
DLF Cyber City
Cyber city Gurgaon
Advant Navis Business Park
Greater Noida Expressway
Delhi NCR
Tidel Park
Perungudi
SIPCOT IT Park
Siruseri
Chennai
Indian
IT Hubs
International Tech Park
White eld
Infosys Campus
Electronic City
Prestige Tech Park
Marathahalli Outer Ring Road
Bangalore
I Gate Knowledge Park
Airoli
Kensington SEZ
Powai
Mumbai
Rajiv Gandhi Infotech Park
Hinjewadi
EON Free Zone SEZ
Kharadi
Pune
Cochin SEZ
Kakkanad
Kochi
Technopark
Phase III, Techno Park
Trivandrum
Tidel Park- Coimbatore
Avinashi Road
Coimbatore
STPI Park
Chandrasekharpur
Bhubaneshwar
Crystal Park
Indra Puri Colony
Indore
Cyber Towers
Hitech City
Infosys Campus
Gachibowli
Hyderabad
DLF IT park
Rajarhat
Technopolis
Salt lake City
Kolkata
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Aug 24, 2016
Redington (India) Ltd
The Indian IT industry is mainly constituted up with IT services,
Business Process Management (BPM), software products,
engineering services and hardware.
The public cloud market alone in the country was estimated
to reach to US$1.9 Bn by 2018 from US$638 Mn in 2014.
India's Business to Business (B2B) e-commerce market is
expected to reach US$ 700 Bn by 2020 whereas the business
to consumer (B2C) e-commerce market is expected to reach
US$102 Bn by 2020 as per the Indian government statistics.
The IT industry has created a huge demand in the Indian education sector. India is the second largest market for e-learning after
the US. The education sector in India is poised to witness major growth in the years to come as India will have world’s largest
tertiary-age population and second largest graduate talent pipeline globally by the end 2020.
India’s IT rms are working with academic institutions and setting up in-house institutes to groom the right talent as these
companies move to Social, Mobility, Analytics and Cloud (SMAC) technologies. Various government initiatives are being
adopted to boost the growth of distance education market, besides focusing on new education techniques, such as E-learning
and M-learning.
The sector is expected to grow at a rate of 12-14 percent for FY16-17E in constant currency terms. The sector is also expected
to triple its current annual revenues to reach US$350 Bn by FY25E.
India’s internet economy is expected to touch Rs. 10 Tn (US$146.72 Bn) by FY18E, accounting for 5 per cent of the country’s
GDP. India’s internet user base reached over 400 Mn by May 2016, the third largest in the world, while the number of social
media users grew to 143 Mn by April 2015 and smart phones grew to 160 Mn.
Increased penetration of internet (including in rural areas) and rapid emergence of e-commerce are the main drivers for continued
growth of data centre co-location and hosting market in India.
Exhibit 4: IT-ITeS Industry Revenue Trends (US$ Bn)
Source: Ministry of Electronics and Information Technology, Karvy Research
Exhibit 5: Public cloud market (US$ Mn)
Source: Ministry of Electronics and Information Technology, Karvy Research
Exhibit 6: India's e-commerce market (US$ Bn)
Source: Ministry of Electronics and Information Technology, Karvy Research
589
663
727
817
896
148
175
196
215
234
180
205
225
258
279
918
104
1148
1289
1408
0
300
600
900
1200
1500
CY12
CY13
CY14
CY15
CY16E
IT service
Software & Engineering Services
Total IT-ITeS
638
1900
0
500
1000
1500
2000
2014
2018E
Public cloud market (US$ Mn)
700
102
0
200
400
600
800
Business to Business (B2B)
Business to Consumer (B2C)
India's e-commerce market (US$ Bn)
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Aug 24, 2016
Redington (India) Ltd
The computer software and hardware sectors in India attracted cumulative Foreign Direct Investment (FDI) inows worth
US$21.02 Bn between April 2000 and March 2016, according to data released by the Department of Industrial Policy and
Promotion (DIPP).
With proven abilities in both on-shore and o-shore services to global clients, emerging technologies now oer an entire new
gamut of opportunities for top IT rms in India.
Social, Mobility, Analytics and Cloud (SMAC) are collectively expected to oer a US$1 Tn opportunity. Cloud represents the
largest opportunity under SMAC, increasing at a CAGR of approximately 30 per cent to around US$ 650-700 Bn by 2020. The
social media is the second most lucrative segment for IT rms, oering a US$250 Bn market opportunity by 2020. The Indian
e-commerce segment is US$12 Bn in size and is witnessing strong growth; and thereby oers another attractive avenue for IT
companies to develop products and services to cater to the high growth consumer segment.
The IMF, in its regional economic outlook for Asia Pacic, retained India’s growth projections at 7.5% for 2016 and 2017. With
implementation of the Unied tax system (GST) and gradual but sustained scal and structural reforms being undertaken by the
government, a more conducive business environment is forecasted, giving all-round llip to the economic progress of the nation.
While the ‘Make in India’ should boost investments in the manufacturing sector, the projects aimed at “Smart Cities” and “Digital
India” would not only transform the way the citizens interact with various government departments and will also provide a further
impetus to business activities and consumer demand within the country. With these predictions that India’s GDP growth might
be substantially higher than earlier projections and to cross even 8% mark.
The Government of Telangana has begun construction of a technology incubator in Hyderabad-dubbed T-Hub to reposition the
city as a technology destination. The state government is initially investing Rs. 350 Mn (US$5.14 Mn) to set up a 60,000 sq ft
space.
The Department of Electronics and Information Technology (DeITY) plans to start a digital literacy programme, aimed at training
over 60 Mn Indians in the next three years to empower them for digital inclusion.
Apple Inc. plans to set up its rst technology development centre outside the US in Hyderabad with an investment of US$ 25 Mn,
where global maps and other softwares to be developed.
Redington India is one of the largest supply chain solution providers in emerging markets, has presence in India, Middle East,
Africa, Turkey, Srilanka, Bangladesh and Commonwealth of Independent States (CIS) countries. The core businesses of the
company are Technology distribution, Hardware support services, Ware housing and Logistics.
End-to-End supply chain solutions
Exhibit 7: SMAC Estimated to Grow to US$ 1000Bn - 2020
Source: Ministry of Electronics and Information Technology, Karvy Research
SMAC
Social
Mobility
Analytics Cloud
Manufacturers &
Brand owners
Online, Retail Chain/LFRs,
System Integrator
End User, SMB,
Corporate, Govt
15% Margin
4~6% Margin 9~11% Margin
PROCUREMENT CHANNELS CUSTOMER
REDINGTON
Distribution
Credit to
Resellers
Warehousing
& Logistics
After Sales
Service
Source: Company, Karvy Research, LFRs: Large Format Retailers, SMB: Server Message Block
650
250
12
0
100
200
300
400
500
600
700
Cloud
Social Media
Indian E-commerce
2020 (US$ Bn)
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Aug 24, 2016
Redington (India) Ltd
Redington's business in India is derived not from the Consumer segment, but from the Enterprise segment. The company has a
portfolio of brand basket, which diversies the risk among the product mix.
There was a de-growth in demand for personal computers during FY15-16. Introduction of Microsoft’s new operating system,
Windows -10 has failed to give any signicant boost to the demand for new PCs/Notebooks.
HP, Lenovo, Dell and Acer capture 90% of the market share in the PC segment. These brands are trying their best to create
demand from convertibles and gaming notebooks. HP and Lenovo aggressively positioned themselves to grab market share.
Redington, being leading seller to these brands, is expected to grow its revenue in the PC segment in the coming scal year.
In the consumer and life style products, HP has introduced new category printers to the Indian market called “Ink tank”. With the
concept of reducing cost-per-page on the back of this new technology, printer demand is expected to be boosted and revenue
to generate.
Exhibit 8: Revenues from IT distribution segment
Source: Company, Karvy Research
Exhibit 9: Revenues from Non-IT distribution segment
Source: Company, Karvy Research
Non- IT
distribution
Segment
Tablets
Telecom
devices
Gaming
consoles
Digital printing
presses
66%
81%
0%
30%
60%
90%
India
Overseas
Total IT distribution revenues (%)
The Indian market still retains the potential for future growth with continued
under-penetration in Tier-3 and Tier-4 towns and the untapped potential to the
huge Server Message Block (SMB) base. Enhanced spends by government
towards implementation of various Digital India and Smart City projects will boost
demand of IT products in the medium term. Increased adoption of security and
storage solutions also augur well for increased demand for Enterprise products
and software.
With its strong core of volume distribution, Redington is engaged in continuously increasing its operational eciencies in order
to remain as the most cost-eective option for all its consumer product vendors. Redington, being “value distributor of choice”
for all its vendors, oering technology solutions to SMBs and Enterprises, it continues to enhance its skills in Technical sales and
Pre-sales, to act as “Force Multiplier”.
The phenomenal pace of growth of e-commerce in India is also translating to increase demand for large back-end centralized
warehousing facilities and logistics. Redington India is well poised to capture the growth opportunities by addressing three kinds
of services which consist of distribution of products to E-commerce players, managing e-commerce logistics, providing post
sale support services to products sold on the e-commerce platform, and it also leases warehouses at close proximity to the
market to cater to specic channel requirements. It has ADCs (Automated Distribution Centers) in the metros and would expand
the network beyond metros to cater to the required demand.
32%
17%
0%
10%
20%
30%
40%
India
Overseas
Total Non-IT distribution revenues (%)
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Aug 24, 2016
Redington (India) Ltd
Exhibit 10: Business Assumptions
Y/E Mar (Rs. Mn) FY15 FY16 FY17E FY18E Comments
Revenue 315549 354296 399709 450948
Revenue is estimated to grow at 12.8% for FY17E
on the back of tapping services to the TierIII and
IV towns of India and expanding horizons into
dierent geographies.
Revenue Growth (%) 12.9 12.3 12.8 12.8
EBITDA 6941 7709 9388 10709
Balanced operating expenses are expected
to help EBITDA to grow YoY basis at 14.1% by
FY18E.
EBITDA Margins (%) 2.2 2.2 2.3 2.4
PAT (normalized) 3865 4262 4980 5703
Reduction in tax rates is expected to aid PAT to
Rs.5703Mn by FY18E.
Net CFO 2568 (1421) 2518 3607
Net Debt 12042 16891 18292 19070
Short term borrowings are maintained for working
capital requirements.
Capex 506 573 615 681 Capex is maintained consistently.
Free Cash Flow 2063 (1995) 1903 2926
Source: Company, Karvy Research
Channel partner relation:
Redington has more than 3300 channel partners across countries.
The unmatched network, geographical presence and the
transparent channel policies have made Redington ‘The preferred
distributor’ of resellers around the world.
Trade partners / Redistribution stockist
Deal Partners
System Integrators/OEM
Government
Large Format Retailers (LFRs)
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Aug 24, 2016
Redington (India) Ltd
Exhibit 11: Revenue & Revenue Growth
Source: Company, Karvy Research
Exhibit 13: Dividend Payout Ratio
Source: Company, Karvy Research
Exhibit 12: EBITDA & EBITDA Margin
Source: Company, Karvy Research
Exhibit 14: EPS
Source: Company, Karvy Research
The revenue has grown by 12.3% for FY16, with a CAGR of 13.7% during
FY12-FY16. We are estimating the revenues to grow to Rs.399709 Mn
by FY17E, with a YoY growth by 12.8%. Redington is expected to earn
10%-12% of prots from Apple products distribution. Redington is a
leading distributor of iPhone as well as Mac business of Apple company.
In September 2016, Apple is coming up with new iPhone models and Mac
Book pro models. The hype is already being created in the market on color
variants and feature designs. Redington, being the leader, is quiet positive
to gain good amount of revenue generation during the October-November
season.
Dividend Payout ratio is healthy on a consistent basis. In FY13, the
company's dividend payout ratio is at 21.1% in FY16; and is expected to
be healthy for FY17E and FY18E as well.
For FY16, employee costs increased primarily on account of increment
to existing employees and additional manpower being recruited in cloud
computing and “Direct to Retail” (DTR) model in telecom space. Other
expenses are expected to come down drastically, as freight charges,
which are around 11.8% to the other expenses, are expected to reduce
with the implementation of GST in the coming years.
Earnings per share of Redington are rising from FY13 to FY16 and
registered Rs.10.7 per share for FY16. The future earnings are estimated
at Rs.12.5 and Rs.14.3 for FY17E and FY18E respectively.
241647
279449
315549
354296
399709
450948
14.0%
15.6%
12.9%
12.3%
12.8%
12.8%
0%
5%
10%
15%
20%
0
100000
200000
300000
400000
500000
FY13
FY14
FY15
FY16
FY17E
FY18E
Revenue (Rs. Mn)
Revenue Growth (%)
6372
6594
6941
7709
9388
10709
2.6%
2.4%
2.2%
2.2%
2.3%
2.4%
1.0%
1.5%
2.0%
2.5%
3.0%
0
4000
8000
12000
FY13
FY14
FY15
FY16
FY17E
FY18E
EBITDA (Rs. Mn)
EBITDA margins (%)
5.0%
4.7%
10.6%
21.1%
18.1%
15.8%
0%
5%
10%
15%
20%
25%
FY13
FY14
FY15
FY16
FY17E
FY18E
Dividend Payout Ratio (%)
8.1
8.4
9.7
10.7
12.5
14.3
6
9
12
15
FY13
FY14
FY15
FY16
FY17E
FY18E
EPS (Rs.)
9
Aug 24, 2016
Redington (India) Ltd
Exhibit 18: Company Snapshot (Ratings)
Low High
1 2 3 4 5
Quality of Earnings
Domestic Sales
Exports
Net Debt/Equity
Working Capital Requirement
Quality of Management
Depth of Management
Promoter
Corporate Governance
Source: Company, Karvy Research
Exhibit 15: RoE & RoCE
Source: Company, Karvy Research
Exhibit 16: EBIT & EBIT Margin
Source: Company, Karvy Research
Exhibit 17: PAT & PAT Margin
Source: Company, Karvy Research
Redington has maintained healthy return ratios; its RoE and RoCE are in
the range of 15.3% and 13.7% respectively for FY16. We anticipate the
company's RoE and RoCE are expected for FY18E at 15.5% and 14.1%
respectively with increased net margins.
EBIT margins are on a constant pace maintaining between 2.1% and
2.5% for FY13-FY16. We estimate the company to expand its operational
capacities and to cope up with the rising demand from infra projects of
digital india and smart cities. The EBIT has grown at a CAGR of 6.1%
for FY12-FY16 and is estimated to rise at a CAGR of 18.2% during
FY16-FY18E.
PAT grew by 10.3% on YoY basis for FY16. The company is expected to see
YoY growth in PAT by 16.8% for FY17E and 14.5% for FY18E respectively.
19.7%
16.7%
16.3%
15.3%
15.6%
15.5%
14.6%
13.7%
13.6%
13.7%
14.1%
14.1%
10%
14%
18%
22%
FY13
FY14
FY15
FY16
FY17E
FY18E
RoE (%)
5993
6209
6515
7276
8911
10172
2.5%
2.2%
2.1%
2.1%
2.2%
2.3%
1.0%
1.5%
2.0%
2.5%
3.0%
0
4000
8000
12000
FY13
FY14
FY15
FY16
FY17E
FY18E
EBIT (Rs. Mn)
EBIT margins (%)
3231
3366
3865
4262
4980
5703
1.3%
1.2%
1.2%
1.2%
1.2%
1.3%
1.10%
1.15%
1.20%
1.25%
1.30%
1.35%
0
2000
4000
6000
FY13
FY14
FY15
FY16
FY17E
FY18E
PAT (Rs. Mn)
PAT margin (%)
10
Aug 24, 2016
Redington (India) Ltd
Valuation & Outlook
At CMP of Rs.106, Redington India is currently trading at P/E of 7.5x on FY18E EPS of 14.3. Based on the expectations of
Apple iPhone 7 to be released in the month of September 2016 and with the Government’s announcement that every phone
must have an in-built panic button and Global Positioning System (GPS) from Jan 01, 2017 and Jan 01, 2018 respectively. The
convergence of IT and mobility continues at a rapid pace and mobile phones are fast becoming an integral part of technology
consumption. With these growth prospects and estimated increase in the operations of services to grew nation-wide and across
geographies. We value the company at P/E of 9.5x of FY18E EPS Rs.14.3 for the target of Rs.136. We initiate coverage on
Redington with a “BUY” rating for a target price of Rs.136 representing an upside potential of 28% in 12-15 months period.
Exhibit 19: PE Band
Source: Bloomberg, Karvy Research
5
8
11
14
17
Aug-12
Sep-12
Oct-12
Nov-12
Dec
-
12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
PE
Average PE
1STD
2STD
~STD
Key Risks
Inventory risk and Credit risk.
Geo-Political risk.
11
Aug 24, 2016
Redington (India) Ltd
Financials
Exhibit 20: Income Statement
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Revenues 279449 315549 354296 399709 450948
Growth (%) 15.6 12.9 12.3 12.8 12.8
Operating Expenses 9957 11279 12864 13991 15666
EBITDA 6594 6941 7709 9388 10709
Growth (%) 3.5 5.3 11.1 21.8 14.1
Depreciation & Amortization 385 426 433 477 538
Other Income 602 678 467 480 541
EBIT 6209 6515 7276 8911 10172
Interest Expenses 1869 1586 1797 2404 2804
PBT 4851 5555 5941 6982 7903
Tax 1272 1450 1464 1767 1944
Adjusted PAT 3366 3865 4262 4980 5703
Growth (%) 4.2 14.8 10.3 16.8 14.5
Source: Company, Karvy Research
Exhibit 21: Balance Sheet
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
Cash & Cash Equivalents 4846 5314 5506 7833 11403
Sundry Debtors 39257 44190 53445 60444 68045
Inventory 22853 28543 37682 46864 53172
Loans & Advances 2252 2043 2315 2315 2315
Other Current Assets 1813 1587 2206 2370 2505
Net Block 1854 2019 2205 2343 2517
CWIP 228 133 143 143 143
Total Assets 73102 83829 103501 122312 140100
Current Liabilities & Provisions 48526 55319 72456 86947 99671
Debt 2103 2137 0 0 0
Other Liabilities 2260 2631 3171 3411 3671
Total Liabilities 52889 60087 75627 90358 103342
Shareholders Equity 799 799 800 800 800
Reserves & Surplus 19414 22942 27074 31154 35958
Total Networth 20213 23742 27874 31954 36757
Total Networth & Liabilities 73102 83829 103501 122312 140100
Source: Company, Karvy Research
12
Aug 24, 2016
Redington (India) Ltd
Exhibit 22: Cash Flow Statement
YE Mar (Rs. Mn) FY14 FY15 FY16 FY17E FY18E
PBT 4851 5555 5941 6982 7903
Depreciation 385 426 433 477 538
Interest 1869 1586 1797 2404 2804
Tax Paid (1354) (1054) (1814) (1767) (1944)
Inc/dec in Net WC (3350) (4126) (7932) (5582) (5669)
Other non cash items 11 182 154 5 (26)
Cash ow from operating activities 2413 2568 (1421) 2518 3607
Inc/dec in capital expenditure (569) (506) (573) (615) (681)
Inc/dec in investments 12 0 0 0 0
Others 3162 450 (67) 0 0
Cash ow from investing activities 2604 (55) (641) (615) (681)
Inc/dec in borrowings (2001) (1183) (2266) 0 0
Dividend paid (160) (411) (900) (900) (900)
Interest paid (2009) (1738) (1848) (2404) (2804)
Others (1059) 1084 7030 3728 4348
Cash ow from nancing activities (5229) (2249) 2016 424 644
Net change in cash (212) 264 (46) 2327 3570
Source: Company, Karvy Research
Exhibit 23: Key Ratios
YE Mar FY14 FY15 FY16 FY17E FY18E
EBITDA Margin (%) 2.4 2.2 2.2 2.3 2.4
EBIT Margin (%) 2.2 2.1 2.1 2.2 2.3
Net Prot Margin (%) 1.2 1.2 1.2 1.2 1.3
Dividend Payout Ratio (%) 4.7 10.6 21.1 18.1 15.8
Net Debt/Equity (x) 0.6 0.5 0.6 0.6 0.5
RoE (%) 16.7 16.3 15.3 15.6 15.5
RoCE (%) 13.7 13.6 13.7 14.1 14.1
Source: Company, Karvy Research
Exhibit 24: Valuation Parameters
YE Mar FY14 FY15 FY16 FY17E FY18E
EPS (Rs.) 8.4 9.7 10.7 12.5 14.3
DPS (Rs.) 0.4 1.0 2.3 2.3 2.3
BVPS (Rs.) 50.6 59.4 69.7 79.9 91.9
PE (x) 12.5 10.9 10.0 8.6 7.5
P/BV (x) 2.1 1.8 1.5 1.3 1.2
EV/EBITDA (x) 9.1 8.6 7.7 6.4 5.6
EV/Sales (x) 0.2 0.2 0.2 0.1 0.1
Source: Company, Karvy Research; *Represents multiples for FY14, FY15 & FY16 are based on historic market price
13
Aug 24, 2016
Redington (India) Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : <5%
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