Buy Redington, tgt Rs 445: PINC

PINC has maintained buy rating on Redington India with target price of Rs 445 in its May 13, 2008 research report. "For Q3FY08, Redington posted consolidated net sales of Rs25.9 billion, a 14% YoY growth. This was on back of consistent growth in the distribution business across geographies. While domestic revenues (52% of net sales) grew 18.4% YoY at Rs13.5 billion, overseas revenues rose 7.9% YoY to Rs 12.4 billion. Scale up in volumes has improved its operational metrics and its PBIT margins have expanded 50bps in two years to 2.3%. Net profit contribution ratio from both markets is at 50/50, because of low effective tax rate overseas i.e. 5%, where as Indian business attracts highest tax rate at 35%. Going forward, we expect higher contribution from India because of higher growth prospects in same."

"Considering the track record and consistent ability to deliver SCM and support services solutions for IT and consumer lifestyle products, we believe Redington is well positioned to maintain its market share in highly competitive scenario. At CMP of Rs 351, the stock is ruling at a P/E of 9.3x and EV/EBITDA of 7x in FY10E. Assuming a terminal growth rate of 6% and 13% cost of equity, we arrive at a DCF value of Rs 445 for the stock excluding NBFC valuations. We initiate coverage with a ‘BUY’ recommendation on a 12-month perspective" according PINC report.