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ICICI Securities
Redington India (Add)
CMP: ₹108.35
Target: ₹121
Redington (India) is an India-based company, which operates in the information technology product distribution business, supply chain solutions and after sales services of information technology products. The company and its subsidiaries operate in India, the West Asia, Turkey, Africa and South Asia countries. The company’s segments include distribution and services. The services segment includes logistics and support services. Its geographical segments include India and overseas. Its information technology products include personal computing & printing; commercial, enterprise & infrastructure; cloud services, and software & security.
We attended the annual analyst meet of Redington India (Redington). The company targets double-digit revenue growth (faster than industry) driven by India business (about 37 per cent share), particularly enterprise IT and services revenues. Moreover, it targets faster earnings growth on the back of margin expansion as the share of services business increases. We marginally raise our revenue and earnings estimates for FY20/FY21 and roll forward our valuation base to FY21 from September 2020 to arrive at our revised target price of ₹121 (earlier: ₹110) based on 8x FY21E earnings. However, given the recent increase in stock price, we downgrade it to ‘Add’ from ‘Buy’. At CMP, the stock trades at around 7.3x FY21E EPS.
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