Sunday, July 3, 2011

Redington - Buy


CMP Rs 83

With an increase of 41% (YoY) in revenues and 24% in PAT (YoY), Redington has done exceedingly well in the fourth quarter. Driven by strong seasonal demand, contribution from Arena (its recent Turkish acquisition) and recovery in the Middle East business (this is important given the unrest in the region), its revenue has gone up by 18% on a QoQ basis as well. The fact that the company was able to show over 20% growth in revenue and PAT in the Middle East (excluding the impact of Arena) provides additional comfort.


Redington's growth in India is driven by three pillars-e-governance spending, corporate hardware-led spending and consumer spending driven by new launches. The tie-up with Dell and momentum in e-governance should ensure top-line growth in core IT markets.

"The low current penetration of BlackBerry handsets in India, recent sign-ups with other tablet and Smartphone OEMs will ensure that the growth momentum in non-IT products remains strong," says Ankur Rudra, analyst at Ambit Capital. Further, the management's plan to focus on non-risky, profitable deals and the increasing push towards the value segment should help it sail through the choppy business environment comfortably.


In other words, while the rising inflation and interest rates may impact the overall business sentiment, its impact on Redington will be minimal because of its focus on high-value products (Redington contributes around 90% of BlackBerry sales in India). Further, it is still quoting at a comfortable PE of 14.18 and this explains why all the eight analysts who track Redington have given it a buy recommendation.

Our Recommendation :

The scrip gave following returns :-

Time Span Price Change %Change
Today 88.85 2.55 2.95
Week 85.20 1.10 1.29
Month 81.90 4.40 5.37
Three Months 81.95 4.35 5.30
Six Months 81.95 4.35 5.30
One Year 72.05 14.25 19.77

Investors can accumulate the scrip around 75 levels for a target price of 90 time frame 1 year

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