2 February 2013
3QFY13 Results Update |
Sector: Logistics
Redington India
BSE Sensex
19,781
Bloomberg
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
S&P CNX
5,999
REDI IN
398.6
35/0.6
94/65
0/10/-5
CMP: INR87
TP: INR102
Buy
Financials & Valuation (INR b)
Y/E March
2013E 2014E 2015E
277.4
8.1
4.1
10.4
26.0
49.4
23.1
19.4
15.7
7.6
1.6
6.5
1.8
0.2
324.4
9.6
5.0
12.5
20.4
59.8
22.9
20.3
16.8
6.3
1.3
5.7
2.3
0.2
Sales
238.3
EBITDA
6.6
NP
3.3
EPS (Rs)
8.3
EPS Gr. (%)
12.5
BV/Sh.(INR)
40.6
RoE (%)
22.4
RoCE (%)
18.1
Payout (%)
9.9
Valuations
P/E (x)
9.6
P/BV (x)
2.0
EV/EBITDA (x)
7.8
Div Yield
0.9
EV/Sales (x)
0.2
Results marginally below expectations:
REDI's 3QFY13 results were marginally
below expectations, with revenue up 11% YoY at INR61.2b (v/s our estimate
of INR63.5b), EBITDA up 14% YoY at INR1.7b (v/s our estimate of INR1.8b) and
net profit up 21% YoY at INR819m (v/s our estimate of INR824m). Domestic
revenue grew 15% YoY and 6% QoQ to INR28.2b, while international revenue
was up 8% YoY and 2% QoQ at INR33.1b. Domestic revenue was boosted by
strong growth in the non-IT segment, primarily due to Apple iPhone launch.
Moderates growth expectations:
The management moderated growth
expectations and noted that consumer demand outlook remains weak; the
anticipated recovery is not yet visible. Nonetheless, the management was
optimistic of de-freezing of government project demand. It guided for IT
growth rate of ~10% for the domestic and international markets. It even
lowered its Apple iPhone guidance for FY13 from INR11b to INR8b.
FCF generation of INR2.7b in 3QFY13:
In 3QFY13, REDI generated FCF of
~INR2.7b (~INR2.3b for 9MFY13), primarily due to lower working capital
requirements, on favorable working capital terms in case of Apple iPhone
sales. REDI's net debt-equity stood at ~1x.
Valuation and view:
REDI is the leading IT SCM player in India and the Middle
East and is a strategic partner to the world's leading technology companies.
We expect REDI to post revenue CAGR of 17% and net profit CAGR of ~20%
over FY12-15. Implementation of GST would unveil and increase new
opportunities for the company, particularly in the non-IT vertical. We are
revising our revenue estimates by -1.3%/-2.4%/-2.2% for FY13/FY14/FY15 and
PAT estimates by -3.3%/-1.4%/-0.9% for FY13/FY14/FY15. REDI trades at 7.6x/
6.3x its FY14/FY15E earnings and EV of 6.5x/5.7x FY14/FY15E EBITDA. We
maintain
Buy
with a target price of INR102 (based on intrinsic P/E of 8x FY15E)
- an upside of ~17%.
Siddharth Bothra
(Siddharth.Bothra@MotilalOswal.com); +91 22 3029 5127
Investors are advised to refer through disclosures made at the end of the Research Report.
1

Redington India
Results marginally below estimates
REDI's 3QFY13 results was marginally below estimate with Revenues up 11% YoY at
INR61.2b vs. est. of INR63.5b, EBITDA up 14% YoY at INR1.7b vs. est. of INR1.8b and net
profit up 21% YoY at INR819m vs. est. of INR824m. Domestic revenue stood at INR28.2b
(up 15% YoY/ 6% QoQ), while international revenues stood at INR33.1b (up 8% YoY/ 2%
QoQ). Domestic revenues were boosted by strong growth in the non-IT segment,
primarily due to Apple iPhone launch.
Moderates growth expectations:
Management moderated growth expectations and
noted that consumer demand outlook remained weak, as the anticipated recovery is
not yet visible. Nonetheless, management was optimistic of de-freezing of
Government project demand. Management guided for IT growth rate of ~10% for the
domestic and international markets. It even lowered its Apple iPhone guidance for
FY13 from INR11b to INR8b.
Segmental Analysis: Domestic demand rebounds; EBIT margins improve
22bp QoQ
Domestic revenue stood at INR28.2b (up 15% YoY/ 6% QoQ), while international
revenues stood at INR33.1b (up 8% YoY/ 2% QoQ).
The share of domestic revenues as percentage of overall revenues stood at 46%
(44% in 2QFY12), while share of international revenues as percentage of overall
revenues stood at 54% (56% in 3QFY12).
Domestic revenues were boosted by strong growth in the non-IT segment, primarily
due to Apple IPhone launch.
EBIT margins stood at 3.4% for domestic operations and 2.1% for international
operations, overall EBIT margins 2.5bp YoY and 22bp QoQ.
Consolidated Segment wise data (INR m)
1QFY12
Revenue
India
Overseas
Total
Inter-segment
Net Sales
EBIT
India
Overseas
Total
EBIT
India
International
Total
Capital Employed
India
Overseas
Total
23,891
26,207
50,099
155
49,943
809
509
1,318
1QFY12
3.4%
1.9%
2.6%
6,132
10,453
16,585
2QFY12
27,052
24,983
52,035
145
51,890
864
441
1,305
2QFY12
3.2%
1.8%
2.5%
6,641
10,998
17,640
3QFY12
24,516
30,645
55,161
157
55,004
822
651
1,473
3QFY12
3.4%
2.1%
2.7%
7,051
12,385
19,436
4QFY12
FY12
1QFY13
25,190
28,702
53,892
176
53,716
885
515
1,399
1QFY13
3.5%
1.8%
2.6%
2QFY13
26,608
32,357
58,966
368
58,597
868
587
1,455
2QFY13
3.3%
1.8%
2.5%
3QFY13
28,152
33,153
61,305
50
61,255
943
712
1,656
3QFY13
3.4%
2.1%
2.70%
24,136
99,596
31,113 112,948
55,250 212,544
98
555
55,152 211,989
1,186
743
1,929
4QFY12
4.9%
2.4%
3.5%
6,878
7,296
14,174
3,680
2,344
6,024
FY12
3.7%
2.1%
2.8%
6,878
7,296
14,174
7,345
7,757
8,179
8,113
8,028
8,868
15,458
15,785
17,047
Source: Company, MOSL
2 February 2013
2

Redington India
EBIT margins QoQ
Revenue growth across domestic and international operations
Sales break-up geography-wise
Source: Company, MOSL
Key updates 3QFY13: Moderates expectations; RIM sales down 50% YoY
Management moderated growth expectations and noted that consumer demand
outlook remained weak, as the anticipated recovery is not yet visible. Nonetheless,
management was optimistic of de-freezing of Government project demand. In
this regard, it expects to win a UID order of ~INR2b in 4QFY13.
Management mentioned that in the domestic market it is close to achieving a
limited break-through (for bulk corporate sales) with Samsung, the largest handset
player in India (~50% market share). If this materializes than it could potentially
open up a huge non-IT market for REDI in the domestic market (including consumer
goods) as REDI currently has no distribution agreements with Samsung in India.
Though currently the acope of agreement if it materializes is small management
is hopeful of building up on the same. However, REI already distributes Samsung
handsets in the African markets.
Management guided for IT growth rate of ~10% for the domestic and international
markets. It even lowered its Apple iPhone guidance for FY13 from INR11b to INR8b.
RIM run rate has now come down to INR500m/month (RIM revenues in FY12 was
16b). The new BB10 line launched by RIM is slated to hit the domestic market by
mid Feb and could potentially arrest this fall.
REDI continued to de-risk its vendor risk with share of HP declining to 19% in the
domestic market and ~32% in the international market, during 3QFY13.
REDI is also eyeing a limited execution role in a 1.5m PC order that HP has won
from the UP Government, as it does not want to take on the risk of delay in State
Government disbursals.
3
2 February 2013

Redington India
REDI is close to disposing the IT real estate of ~INR1.5b, which it has been stuck
with in its NBFC arm. Management is hopeful of concluding this deal sometime
within FY13. Post which it plans to move fast with regard to its plans to sell minority
stake in its NBFC arm to strategic and financial investors.
Apple iPhone guidance lowered
During 3QFY13, REDI started distribution of Apple iPhone towards the end of
October'13 and clocked sales of ~INR4b, during the quarter. REDI's overall revenues
from all Apple products stood at INR6.4b for 3QFY13.
Nonetheless, given the weak consumer demand outlook, management has
downgraded their FY13 revenue guidance from Apple iPhone from ~INR11b to INR8b.
While the margins for Apple iPhone are lower, REDI currently enjoying very favorable
working capital terms, with credit period of ~30days and receivable period of ~15days,
which has allowed REDI to lower its working capital requirement in 3QFY13.
Consequently, during 3QFY13, REDI generated FCF of ~INR2.7b (~INR2.3b for
9MFY13), primarily due to lower working capital requirements.
Trend of overall Apple sales over FY10-9MFY13 (INR m)
Source: Company, MOSL
Valuations and view
REDI is the leading IT SCM player in India and the Middle East and is a strategic
partner to the world's leading technology companies. We expect REDI to post
revenue CAGR of 17% and net profit CAGR of ~20% over FY12-15E. Implementation
of GST would unveil and increase new opportunities for the company, particularly
in non-IT vertical. Its efforts to diversify across the supply chain industry are paying
off, with non-IT segment as a percentage of revenues increasing from ~5% in FY07
to ~19% in FY12.
During 3QFY13, REDI generated FCF of ~INR2.7b (~INR2.3b for 9MFY13), primarily
due to lower working capital requirements. REDI's net debt equity stood at ~1x.
We believe successful implementation of REDI's strategic initiatives could allay
concerns on 1) its NBFC arm, 2) outlook for its subsidiary Arena and 3) asset-heavy
capex plans for ADCs.
We are revising our revenue estimates by -1.3%/-2.4%/ -2.2% for FY13/ FY14/ FY15
and PAT estimate by -3.3%/-1.4%/ -0.9% for FY13/14/15.
REDI trades at P/E of 7.6x/ 6.3x its FY14/FY15 earnings and EV of 6.5x/ 5.7x its FY14/
FY15 EBITDA. We maintain Buy with a target price of INR102, based on intrinsic P/
E of 8x its FY15E earnings, an upside of ~17%.
4
2 February 2013

Redington India
Redington India: an investment profile
Company description
REDI is promoted by the Singapore-based Kewalram
Chanrai Group that also owns OLAM and Jaslok Hospital
in Mumbai, India. In 1993, it began as a component
distributor and moved into completed products such as
PCs, desktops etc and finally into value added products.
It then positioned as a complete supply chain manager,
with a focus on value-added IT products. In the past 3-4
years, REDI is slowly transitioning into a complete supply
chain manager to include non-IT products too, with a
presence in India, Middle East, Africa and Turkey. REDI
plans to slowly extend its reach to CIS countries too. It
aims to have a global footprint in developing countries.
Recent developments
Lowered iPhone sales guidance from INR11b in FY13
to INR8b
RIM sales fell 50% YoY in 3QFY13
FCF generation of INR2.7b in 3QFY13 (INR2.3b in
9MFY13)
Valuation and view
We are revising our revenue estimates by -1.3%/-
2.4%/ -2.2% for FY13/ FY14/ FY15 and PAT estimate
by -3.3%/-1.4%/ -0.9% for FY13/14/15.
REDI trades at P/E of 7.6x/ 6.3x its FY14/FY15 earnings
and EV of 6.5x/ 5.7x its FY14/ FY15 EBITDA.
We maintain
Buy
with a target price of INR102, based
on intrinsic P/E of 8x its FY15E earnings, an upside of
~17%.
Key investment arguments
An indispensable link in IT supply chain
Pursuing successful four-pronged growth strategy
Strategic diversifications aimed to de-risk model
Sector view
REDI is likely to be a key beneficiary from the robust
growth outlook of Indian IT industry, which is
forecasted to post a CAGR of 10% from ~USD66.4b in
FY12 to ~USD95.9b by FY16.
India's market offers significant opportunities to IT
services providers due to increasing demand.
REDI has good scope to add new products to its
existing verticals and move up the value chain.
Key investment risk
Failure to adapt to IT industry changes
Intense competition
High risk of clients' concentration
Exposed to risks of conducting business in multiple
geographies
EPS: MOSL forecast v/s Consensus (INR)
MOSL
Forecast
8.3
10.4
Consensus
Forecast
8.5
10.1
Variation
(%)
-2.4
3.0
Target price and recommendation
Current
Price (INR)
87
Target
Price (INR)
102
Upside
(%)
17.2
Reco.
Buy
FY13
FY14
Stock performance (1 year)
Shareholding Pattern (%)
Dec-12
Promoter
Domestic Inst
Foreign
Others
21.1
8.4
64.1
6.5
Sep-12
21.1
9.0
63.3
6.7
Dec-11
21.1
8.8
63.3
6.8
2 February 2013
5

Redington India
Financials and Valuation
2 February 2013
6

Redington India
N O T E S
2 February 2013
7

Disclosures
This report is for personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. This research report does not constitute an offer, invitation or inducement
to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for public distribution and has been
furnished to you solely for your information and should not be reproduced or redistributed to any other person in any form.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates
or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
The information contained herein is based on publicly available data or other sources believed to be reliable. While we would endeavour to update the information herein on reasonable basis, MOSt and/or its
affiliates are under no obligation to update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or
employees shall not be in any way responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report . MOSt or any of its affiliates
or employees do not provide, at any time, any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness
for a particular purpose, and non-infringement. The recipients of this report should rely on their own investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision
based on this report or for any necessary explanation of its contents.
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, MOSt has incorporated a Disclosure of Interest
Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report.
Disclosure of Interest Statement
1. Analyst ownership of the stock
2. Group/Directors ownership of the stock
3. Broking relationship with company covered
4. Investment Banking relationship with company covered
Redington India
No
No
No
No
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or
will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible
for preparation of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to
law, regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
For U.K.
This report is intended for distribution only to persons having professional experience in matters relating to investments as described in Article 19 of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (referred to as "investment professionals"). This document must not be acted on or relied on by persons who are not investment professionals. Any investment or investment activity to
which this document relates is only available to investment professionals and will be engaged in only with such persons.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States.
In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state
laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein
are not available to or intended for U.S. persons.
This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional
investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major
institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended
(the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into
a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within
the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,
MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst
account.
For Singapore
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors
Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore
to accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Nihar Oza
Kadambari Balachandran
Email: niharoza.sg@motilaloswal.com
Email : kadambari.balachandran@motilaloswal.com
Contact: (+65) 68189232
Contact: (+65) 68189233 / 65249115
Office address: 21 (Suite 31), 16 Collyer Quay, Singapore 049318
Motilal Oswal Securities Ltd
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com