Redington India is the second largest distributor of digital products in the country. It also has a global presence primarily in the Middle East and Africa where it is the largest distributor of digital products.
In India they have a large share of the Apple I-Phone and Samsung android phones, and together with Ingram Micro control the third party distribution of these products.
The trend for both manufacturers, Apple and Samsung, has been to streamline their distributors. As a result HCL Infosystems, the third largest distributor in the country, lost the contract to distribute Apple products last year. This has helped not just the sales of Redington but management also expects improving EBITDA margins as a result of better pricing power.
Currently the shares trade at a reasonable 7.5x earnings, 0.90x price to book value and yield nearly 3%. We believe this is a very reasonable valuation for a company that has an enviable track record of capital allocation and a distribution network in India, the Middle East and Africa that is not easily replicable.
The stock makes part of our investment fund ACATIS India Value Equities.
Our disclaimer applies to the share report.
Photo: Siddharth Mehta-Thomas