July 04, 2016 / 18:03 IST
Religare's research report on Redington India
REDI generated 57% of revenue from India in FY16. While the non-IT India segment has done well over the past few years (13% 4-year CAGR), we note that growth in the key IT segment has been muted (5.5% 4-year CAGR) due to weak capex and longer refresh cycles. While cloud computing will outperform the on-premise segment, we think REDI remains a strong play on India’s tech capex recovery and GST Bill passage. New initiatives like ProConnect continue to do well and are adjacent to REDI’s core supply chain management capabilities.
While FY16 was a tough year due to cyclical headwinds, we continue to like REDI for its strong distribution and focused execution. Valuations have corrected sharply and the stock is attractive valued at 1.2x FY18E P/BV (8x P/E) with ROEs of 17%. A pick-up in India’s tech capex and passage of the GST Bill are key stock catalysts. Maintain BUY with a Mar’17 TP of Rs 140.
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