Apple store opening in India will not impact Redington much: Analysts

The two Apple stores in India will not dent the fortunes of Redington — a listed Apple products’ distributor in India for over a decade — say analysts, unless the US-based firm expands aggressively here with more on-ground presence.

Apple’s first retail store — Apple BKC — opened at Reliance Jio World Drive Mall at Bandra Kurla Complex (BKC) on Tuesday. The second store is scheduled to open in New Delhi’s Select Citywalk on April 20.

In contrast, starting with a three-branch, 25-dealer operation in 1993, Redington now reaches out to its channel partners through 81 sales locations and over 200 warehouses in India.

“Apple is opening just two stores here, which are insignificant to dent Redington’s fortunes. Apple will have to expand rapidly on-ground in order to make a significant impact. Redington operates on a wafer-thin margin of around 3 per cent, which is a worry. There are better options like DMart, Trent and Vaibhav Global in the listed retailing space than Redington,” said A K Prabhakar, head of research at IDBI Capital.

Meanwhile, at the bourses, Redington has been an under-performer, slipping over 7 per cent so far in calendar year 2023 (CY23). This compares to 1.5 per cent fall in the BSE Sensex, ACE Equity data shows.

Redington, which commenced distribution operations in 1993 in western and southern India with HP’s IT products, started distributing Samsung monitors here a year later.

In 2007, the company’s stock debuted on the BSE and NSE, and it also started distributing and repairing Apple products in India.

Besides India, Redington operates in South Asia, Middle East, Africa, and Turkey.

Its offerings are personal computers (PC), notebooks, tablets, printing solutions, servers, storage and software. They also include networking solutions, security solutions, smartphones and Cloud-related services.

At the fundamental level, Redington reported a 1.1 per cent year-on-year (YoY) fall in net profit at Rs 392.8 crore in Q3 of FY23. This was due to a sharp hike in interest outgo on account of a rise in working capital — up from 12 days in Q3 of FY22 to 30 days in Q3 of FY23.

According to Redington India, Apple contributed one-third (30 per cent) of its December 2022 (Q3 of FY23) revenues with iPhone’s contribution at 24 per cent.

HP Inc, Dell EMC, Lenovo, Samsung and other manufacturers were the other contributors during this period, with a share of 11 per cent, 8 per cent, 6 per cent, 5 per cent and 40 per cent, respectively, of the total revenue, a company presentation said.

“We remain positive on Redington for a longer-term perspective and expect the financial performance of the company to improve substantially over the next two-three years. Giving a target PE multiple of 12x to its FY24E profit after tax (PAT) of Rs 1,562.7 crore, we arrive at a target price of Rs 248 for the stock,” Prashant Sharma, analyst at Quantum Securities wrote in a post Q3 of FY23 results note.

 Those at Nuvama, too, remain bullish on the stock. They believe the company (Redington) continues to demonstrate superior execution on the back of strong brand partnerships and a diversified geographical footprint.

“The stock is trading at an attractive 9.9x FY24E EPS. We have a buy/sector outperformer rating with a target price of Rs 214 based on a P/E of 11x Q3FY25E P/E,” wrote Nikhil Choudhary and Mohit Motwani of Nuvama, in a recent note.

According to technical analysts, Redington may spend some more time around the current levels before moving up.

“Traders can consider accumulating within the Rs 165-175 zone and maintain stop loss at Rs 148 for the upside potential of over Rs 210 levels,” said Ajit Mishra, vice-president for technical research at Religare Broking.