Redington (India) reported a mixed set of numbers for Q2FY19. The revenue for the quarter grew by 8.8% qoq and 10.7% yoy to Rs11,109cr against median consensus estimate of Rs11,258cr. EBITDA declined by 5.4% yoy but grew by 12.1% qoq to Rs187cr, against median consensus estimates of Rs190cr. EBITDA margin contracted by 29bps yoy but expanded by 5bps qoq to 1.7%. PAT declined by 6.6% yoy but grew by 18.6% qoq to Rs105cr against median consensus estimate of Rs102cr.
Revenue growth was aided by stronger growth in both India and Overseas business. India business grew by 11.2% yoy and 16.9% qoq. Overseas business grew by 10.3% yoy and 4.3% qoq.
Gross margins came off marginally, down 28bps yoy and 32bps qoq. Led by decline in India business' gross margins.
IT segment in India business grew by ~19% yoy during Q2FY19. Mobility declined by ~8% yoy during the period, while Services grew by ~40% yoy.
The gross margins decline in India Business was due to selling of ageing inventory at deep discounts (one-time impact), pertaining to the Enterprise business. Working Capital days in India business improved by 9 days during Q2FY19.
There is minor portion of inventory still to be disposed off, which is expected to happen in Q3.
The mix in the Overseas business did not change on the yoy basis implying broad based, double digit growth for Q2FY19. However, on qoq basis, overseas mobility declined by ~10%, while IT and Services grew by ~13% qoq and ~4% qoq respectively.
The company, in an earlier call on August 14, 2018 had addressed the concerns arising from sharp depreciation of Turkish Lira vs. the USD. The Lira depreciated by ~32% during the quarter, thereby entailing higher tax and resulting in loss in USD terms.
Excluding Turkey, the growth in Overseas business was ~14% yoy. In Q2FY19, Turkey has negatively contributed to 8.7% of consolidated profits.
Further to the update on prior call, where the management gave measures to absorb some of the impact of Lira depreciation, the progress is on track with adequate reductions in employees and working capital.
ProConnect continued to report strong growth during the quarter, up 30% yoy.
Redington India Ltd is currently trading at Rs. 82.10, up by 0.1 points or 0.12% from its previous closing of Rs. 82 on the BSE.
The scrip opened at Rs. 83 and has touched a high and low of Rs. 85.90 and Rs. 82.05 respectively. So far 6,93,379 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.
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