Redington - BUY - Form is temporary; class is permanent - Ambit

Redington's 1QFY14 results already addressed the concerns on currency depreciation and moderation in the Apple business; however, the market is now concerned about the margin pressure, tight liquidity and working capital pressure. Margin challenges related to the business mix shift are likely to continue, but improving traction in the higher-margin Enterprise business in India and value business overseas provide confidence on margins. Working capital pressure, on the other hand, appears to be a more cyclical than a structural issue. After the market over-reaction over the last couple of months, the stock is now trading at attractive valuations of 7.2x FY14 P/E. We have cut our FY14/FY15 EPS estimates by 18%/9% to reflect margin pressure and higher borrowing costs. We also cut our target price by 27% to Rs81 (implying 10.6x 14 PE), but the stock still offers 47% upside. We reiterate a strong BUY.

Source : Equity Bulls

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