Redington India Q1 net profit falls 19%

Shares of Redington India climbed over 18% to Rs 111.40 on the BSE on Friday, a day after the company declared its financial results for the quarter ended June 2020 (Q1FY21). 
The company’s net profit declined 19.31% to Rs 88.78 crore during the quarter as against Rs 110.03 crore profit logged during the corresponding quarter of the previous fiscal.

Total revenue came in at Rs 10,722 crore, down 8.2% as against Rs 11,686.6 crore in the year-ago period.
Earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at Rs 230.1 crore, down 6% YoY.
For the quarter ended March 2020 (Q4FY20), the company had posted revenue of Rs 4,403.10 crore as against Rs 4,691.93 crore in Q4FY19. Net Profit, however, was at Rs 177 crore against Rs 36.16 crore in Q4FY19.
Redington’s execution in spite of the lockdown-induced challenges is commendable. Although, the ProConnect profitability needs to be closely tracked, the overall business is well managed.

Considering the company’s improving return on capital employed (RoCE), its valuation at 6.1x FY21E earnings per share (EPS) is attractive.
Recently, Redington sold entire stake in its wholly owned subsidiary Ensure Support Services (India) to Accel. The deal is subject to required regulatory approvals.

Ensure is in the business of providing after sales support services like warranty and out-of warranty services independently and on behalf of Original Equipment Manufacturers (OEM) and other allied services. This business vertical is not strategic to the future plans of the Company and hence this divestment of 100% shareholding in Ensure.

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