Buy Redington (India), target Rs 166: Edelweiss Financial Services
Buy Redington (India) Ltd. at a price target of Rs 166.0 .
By ETMarkets.com |
Edelweiss Financial Services has a buy call on Redington (India) Ltd. with a target price of Rs 166. The current market price of Redington (India) Ltd. is Rs 117.6. Time period given by the brokerage is a year when Redington (India) Ltd. price can reach the defined target.
Redington (India) Ltd., incorporated in 1961, is a midcap company with a market cap of Rs 4706.03 crore.
Investment rationale by Edelweiss
We attended the Redington India (Redington) analyst meet. The key takeaways are: 1) overseas business (ex‐Turkey) growing strongly; 2) hike in basic customs duty (BCD) on mobile phones impacted FY18 India revenue growth (2.5%, net of taxes), which is expected to normalize by H2FY19; 3) the latter lifted working capital (WC) days, which should correct in FY19 and drive up RoCE and FCF; 4) GST implementation will drive ~30bps margin expansion in India business over the next 1–2 years; and 5) management sees high potential in the ProConnect business and is exploring inorganic opportunities to improve capabilities. We maintain our positive view on the stock owing to the company’s improving RoE (a 170bps jump) and earnings growth (15%‐plus CAGR) over FY18–20E, as well as attractive valuations. Maintain BUY with a target price of INR166.
Redington (India) Ltd., incorporated in 1961, is a midcap company with a market cap of Rs 4706.03 crore.
Investment rationale by Edelweiss
We attended the Redington India (Redington) analyst meet. The key takeaways are: 1) overseas business (ex‐Turkey) growing strongly; 2) hike in basic customs duty (BCD) on mobile phones impacted FY18 India revenue growth (2.5%, net of taxes), which is expected to normalize by H2FY19; 3) the latter lifted working capital (WC) days, which should correct in FY19 and drive up RoCE and FCF; 4) GST implementation will drive ~30bps margin expansion in India business over the next 1–2 years; and 5) management sees high potential in the ProConnect business and is exploring inorganic opportunities to improve capabilities. We maintain our positive view on the stock owing to the company’s improving RoE (a 170bps jump) and earnings growth (15%‐plus CAGR) over FY18–20E, as well as attractive valuations. Maintain BUY with a target price of INR166.
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