Nomura Equity Research has maintained a 'buy' rating on Redington India as it expects the company to be a beneficiary of increases in IT & non-IT spending in India due to underpenetration of computers, lifestyle electronics and consumer durables. Distribution of Apple in India andSamsung products in the overseas markets are likely to benefit the company, it says.
The brokerage has revised its target price to Rs 108, an upside of over 40 per cent from the current market price.
"We believe that a sales uptick from a full-year impact of Apple iPhone along with growth in the rest of the Apple portfolio will contribute 52 per cent of the incremental sales in the domestic business in FY14F. Additionally, we expect a bulk of the 5 per cent growth in the domestic IT business in FY14F to be driven by the likely execution of an additional Rs 4 billion of the UID Aadhar project order in FY14F," the brokerage said.
Apart from continuation of growth in the IT business in the Middle East and Africa on the back of the strength in Lenovo and Asus brands and stability in Arena, the brokerage expects the ramp-up of Samsung products to be a key growth driver for the company's overseas business.
"We forecast that sales for Samsung will likely scale up by 4x between FY13-FY15F. While Samsung's 4QFY13 run-rate was about half that of Nokia's quarterly average run-rate in FY12, the management expects the ramp-up to be complete by 1QFY15," the report said.
This ramp-up alone is expected to account for ~24 per cent of the incremental sales that the brokerage is building in for FY14F.
Nomura believes that the current valuation of 7.7x FY14F EPS (6.3x FY15F EPS) is compelling in the context of a FY13-15F EPS CAGR of 21 per cent, average ROE/ROCE of ~20 per cent /18 per cent and continuation of positive free cash flow generation between FY13 and FY15F.
At 10:15 am, the stock was at Rs 77.10, up 1.31 per cent, on the BSE. It touched a high of Rs 77.80 and a low of Rs 77 in trade today.