Redington India revenues up on strong sales of iPhones and Samsung gadgets
Moneylife Digital Team 01 February 2013

Redington India has posted positive growth on strong iPhone and Samsung sales but its results are short of overall consensus estimates

Redington India announced a net income of Rs81.9 crore for the December quarter which was in line with Nomura’s estimate of Rs80.2 crore but short of market consensus estimates of Rs83 crore. The drivers of increased income were sales from iPhones and increased contribution from non-IT business. Even Samsung gadgets performed well, too.
 

According to Nomura, EBITDA after other income (a preferred metric as other income includes discount that company receives from vendors) was 4% above their expectation of Rs168.2 crore, while margins were at 2.86%, or 14 basis points higher than estimates. The report said, “Sales in US dollar terms grew at roughly 1.8% year-on-year as Samsung sales picked up substantially. This, we expect, is on account of improved profitability in Arena (Turkey) and incremental contribution from Samsung.”
 

Nomura thinks the company is a Buy on account of better performance from Turkey, one of its subsidiaries and improved sales of Samsung gadgets, as Nomura expects Samsung to perform better relative to Apple. It would seem apparent that Samsung is indeed tightening the screws on Apple, which could make Redington perform well as it is engaged in distribution of both the brands.
 

Apart from this, the macro-economic variable favours the Indian demographic. According to Nomura, the next 10 years will be crucial as the Indian middle-class will rise to occasion and double in numbers, which will fuel demand for consumer electronics and gadgets. As per Nomura, one of the big benefits of Redington is its end-to-end supply chain connectivity and good history of inventory and risk management. Nomura, speaking of Redington’s valuation, said, “The current valuation at 7.7x FY14F EPS is a 34% discount to its discount to its six-year average of 11.7x and is an attractive entry point, in our view.”
 

Redington India, one of the largest supply chain companies in India has 41 subsidiaries, all spread out at home as well as abroad in South Asia, Middle East, Turkey and Africa, and operate mainly in distribution business, supply chain business, after-sales services of IT and other products and financial services.
 

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