Buy Redington; target of Rs 109: Nirmal Bang

“Redington (India), revenues grew 5.6% QoQ and 25% YoY at Rs.5738 crores. India Business de-grows 9% QoQ and Overseas business grows 20.6% QoQ. EBIDTA margins expanded 16 bps QoQ to 2.68%. Tax rate reduced to 23.4% during the quarter against 28% in the previous quarter. India business grew 16.6% YoY, de-grew 9% QoQ at Rs.2520 crores mainly on the back of lower demand in the e-governance and the corporate segments which the company says is an aberration and sales would pick up in the current quarter. Blackberry and Apple product sales continued to show good growth during the quarter.”

“Overseas business grew 20.6% QoQ, 32.5% YoY at Rs.3233 crores on the back of good growth seen in the Middle East and African geographies. Arena sales continue to lag while Nokia sales remain stable. The company expects some more quarters for the Arena business to report better numbers. Interest costs were higher at Rs.37.8 crores during the quarter on the back of increase in the interest’s rates in India and addition of interests costs of Arena and NBFC businesses. We expect this cost to go down in the coming quarters.”

“Q4FY12 is a seasonally better quarter for the company due to higher demand of the IT Products by the Government and the Corporate segments to avail Tax benefits. The company is confident of maintaining 30%+ YoY growth in the Overseas business and 25% YoY growth in consolidated revenues going forward.”

“We are revising our numbers upwards for FY12E and FY13E factoring good growth the company showed in the current quarter. We have revised Revenues and PAT by 7.4% and 1.3% respectively for FY12E and by 4.3% and -0.5% respectively for FY13E. We had recommended BUY on the stock in the event update dated 22nd Dec 2011. Since then the stock has moved up 13%. We continue to have a positive outlook on the company and maintain a BUY view for the stock. At CMP, the stock is trading at 8.8x its FY13E earnings and we have a target price of Rs.109 for the stock,” says Nirmal Bang research report.     

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