Redington: Indian IT Products Distributor at Depressed Valuation

Sidd Thomas and Kimi Venkataraman presented their in-depth investment thesis on Redington (India: REDINGTON) at Asian Investing Summit 2020.

Thesis summary:

Redington is a leading distributor of IT products in India and the MENA region (including Turkey). It has 225+ clients, ranging from large IT product companies such as HP, Dell, and Apple to smaller, niche operators such as JABRA. Redington’s value proposition lies in its ability to bring products to market through a network of 40,000+ last-mile partners.

Redington shares recently traded at a P/E of 4x, due to a 50% drop in the share price in recent weeks. While the coronavirus-caused disruption will hurt earnings, the business should bounce back given its long-term track record of earnings and revenue growth (ten-year CAGR of ~15%). Sidd and Kimi value the business based on a five-year average P/E multiple of 10x and 2019 EPS, suggesting upside of roughly 100% from recent levels.

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About the instructors:

Siddharth Thomas founded Beaconsfield Investment Management in 2010. Prior to that he worked as an analyst covering Asian equities at Fairfax Financial Holdings and as an associate analyst at Credit Suisse equity research. Born and raised in Chennai, India, Siddharth completed his bachelor’s of science degree from Purdue University. He is also a level 3 candidate in the CFA program.

Krishnaraj (Kimi) Venkataraman is the Managing Partner of Kimi & Partners, an investment firm he founded in 2008. Kimi’s previous work experience includes Tata Steel and P&G India, as well as several business startups in India, including Marketics which was successfully sold to WNS. Kimi has been an investor for more than 20 years and, after reading Warren Buffett, has been investing in undervalued Indian stocks. Kimi lives in Bangalore, India, with his wife and two daughters.