Redington Rises The Most In Nearly Two Weeks As Analysts Retain ‘Buy’ After Q3 Beat

Shares of Redington India Ltd. rose over 6%, the most in nearly two weeks, after analysts retained ‘buy’ after the company reported net income above average analyst estimate, for quarter-ended December.

Redington (India) Q3FY22 (Consolidated, QoQ)

  • Revenue up 9% at Rs 16,600.74 crore Vs Rs 15,287.46 crore
  • Net profit up 23% at Rs 397.06 crore Vs Rs 323.09 crore
  • Ebit up 24% at Rs 491.51 crore Vs Rs 395.53 crore
  • Margin at 3% Vs 2.6%

All the nine analysts tracking the company maintain ‘buy’. The overall consensus price of analysts tracked by Bloomberg imply an upside of 26.5%.

Trading volume was nearly four times the 30-day average at this time of the day.

Investec on Redington

  • Retains ‘buy’ with the target price reduced to Rs 185 from Rs 190, still an implied upside of 11.31%
  • Q3FY22 is a defining quarter for Redington on many counts: i) it marks a significant leadership transition, ii) the company’s scale and dominance continues to aid margin performance in a supply constrained environment, and iii) Q3FY22 appears to be the start of working capital normalization.
  • Believes margins could decline once supply side shortages normalize, hence assuming lower margins in FY24 is a fair assumption.
  • Effective tax rates could normalize to 23-24% from current 20% leading to limited or low earnings growth.
  • Sees headwinds to margins and increasing working capital intensity through FY24E.
  • Increases EPS for FY22/ FFY23/ FY24E by 8%/ 10.2%/ 4.8%.
  • Cuts target P/E to 11x vs 12x earlier.

Source: Bloomberg, Brokerage Note

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