Redington India Share: Is it worth considering?

Background

Redington India, a mid-sized IT company came into being in the year 1993 after the acquisition of the  Indian branch of Redington Pte Limited, Singapore[3][8][17]. It started the distribution of Hewlett Packard IT products and relocated its registered office.

The company through the years has transformed itself from an IT products company to an integrated supply chain solution provider[8].

With the advent of GST, Redington India is proactively building large automatic distribution centers (ADCs) in key business regions to meet the storage and warehousing requirements[9][14].

In early December 2017, Redington got an “upgrade” from rating agencies like CRISIL(S&P Global Company), ICRA etc. Brokerages like IIFL etc. also gave a thumbs-up to stock.

Owing to this an important question arises, 

Why an upgrade for an IT company especially when the sector is going through a  tough transition?

Reasons for Upgrade to Redington India

  • A tie-up with leading companies to distribute their products leading to growth in revenue and margins going ahead[9][11][12][13]
  • Revenue growth at Compound Annual Growth Rate(CAGR) of 14-16%[9][15]
  • Return on Equity(ROE) of ~15% indicating strong financials
  • Strong financial profile
  • Robust credit appraisal and recovery system[16]

Services

  • Supply Chain Solution Provider in emerging markets in categories like IT products, Consumer and Lifestyle(Digital Lifestyle, Telecom, Entertainment, Digital Printing) products[17][18][19]
  • Distributor of hardware products of HP, Intel, Apple, Amazon, Xiaomi, Blackberry, BENQ, Compaq, Philips, Canon etc[18]
  • Distributor of software products of NetApp, Cadensworth, Fortinet, Ricoh, CtrlS Datacenters Limited, Vaultize, SMART Technologies Inc, Barracuda etc[17][18]

Competitors to Redington India

Redington India_Peer Comparison

Table 1. Redington & it’s listed competitors[6]

Share Holding 

 

Share Holding Pattern_Redington India

Fig 2. Share Holding Pattern (As of March 2017)[6][8]

Financials

Last Closing= Rs. 139 on NSE (On 22nd March, 2018)

Face Value = Rs.2, EPS = 12.27, Book Value = Rs. 84.77 [4]

P/E =11.10, P/B =2.32 , ROE = 15.64 (As on Sept’17) [4]

Market Cap = Rs. 5,450.35

Debt-Equity Ratio = 0.45 [20][21]

52-Week Range: Rs. 105.50 – Rs. 209.90

1-yr Return = 28.65% [March 23,2017 – March 22,2018] 

redington-india_1yr-performance.jpg

Fig 3. Redington India performance in the past 1-yr[5]

Mutual Fund Exposure to Redington India

Along with brokerages, fund managers are deploying the cash being coming in through Systematic Investment Plans(SIP’s) towards buying quality long-term play stocks.

Redington India_Mutual Fund House

Further Reading on Redington India 

  1. https://www.icra.in/Rationale/ShowRationaleReport/?Id=65957
  2. https://www.ndtv.com/business/stock/redington-_redington/financials

Conclusion

With an expertise in Supply Chain Solutions and a tie-up with almost every leading software/hardware service provider of the world selling their product in India, Middle East, Singapore, Bangladesh, Sri Lanka and Commonwealth of Independent States(CIS) makes Redington India a very attractive long-term bet.

Considering its current valuation(post 30% correction since Jan 15th, 2018) a value investor will be able to understand the stock’s potential over a 3-5 year horizon.

If you want to share your opinion kindly do so in the comments section or email me at u2d2tech@gmail.com.

References:

  1. http://www.channelpostmea.com/2014/05/13/itochu-in-talks-to-buy-redington-india-for-500-million/
  2. http://www.moneycontrol.com/india/stockpricequote/computers-hardware/redingtonindia/RI37
  3. https://www.redingtonindia.com/
  4. https://www.valueresearchonline.com/stocks/snapshot.asp?code=15683
  5. https://www.google.co.in/search?q=redington+india+share+price&oq=redington+india+share+price&aqs=chrome..69i57j69i60l2j0l3.4608j0j7&sourceid=chrome&ie=UTF-8
  6. http://www.moneycontrol.com/competition/redingtonindia/comparison/RI37
  7. http://www.thehindubusinessline.com/markets/stock-markets/crisil-upgrade-bodes-well-for-redington/article9987369.ece
  8. http://profit.ndtv.com/stock/redington-_redington
  9. https://www.icra.in/Rationale/ShowRationaleReport/?Id=65957
  10. http://www.equitybulls.com/admin/news2006/news_det.asp?id=219633
  11. http://www.bgr.in/news/exclusive-xiaomi-ties-up-with-redington-to-start-selling-smartphones-in-offline-retail-stores-in-india/
  12. http://www.thehindubusinessline.com/info-tech/awaiting-concrete-proposal-from-apple-suresh-prabhu/article10020073.ece
  13. http://www.financialexpress.com/market/apple-distributor-redington-india-at-all-time-high-ahead-of-new-iphone-launch/851592/
  14. https://www.redingtonindia.com/warehousingandlogistics.aspx
  15. https://economictimes.indiatimes.com/opinion/interviews/we-look-apple-as-an-opportunity-not-threat-raj-shankar-md-redington-india/articleshow/52462789.cms
  16. https://www.indiainfoline.com/article/news/crisil-assigns-aa-stable-rating-to-redington-india-4929871408_1.html
  17. https://www.redingtonindia.com/milestone.aspx
  18. https://economictimes.indiatimes.com/redington-(india)-ltd/infocompanyhistory/companyid-18903.cms
  19. http://www.moneycontrol.com/company-facts/redingtonindia/history/RI37#RI37
  20. https://www.ndtv.com/business/stock/redington-_redington/financials
  21. http://www.moneycontrol.com/financials/redingtonindia/ratios/RI37
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