Key highlights from Redington (India) Limited (REDINGTON) Q3 FY22 Earnings Concall
Management Update:
- REDINGTON reported a PAT of INR388 crores, a 103% growth YonY, which is an all-time high PAT the company has ever had. And PAT for the nine months is now greater than that for the full year last year.
Q&A Highlights:
- Nisarg Vakharia from Lucky Investment asked about higher EBITDA margins in 3Q22 with Apple’s business being lower, but margins still higher and sustainability of it. S.V. Krishnan CFO said that EBITDA margins going in the right direction is a reality. This is due to high demand and that’s driving supply which is allowing to higher gross margin. Secondly, a lot of margins are driven by growth in the enterprise business and not only by Apples contribution.
- Krish Mehta from Enam Holdings enquired about the split of revenue and margins for cloud and cloud managed services. S.V. Krishnan CFO said cloud business for 3Q22 was INR411 crore, a 35% YonY growth. Services as a proportion of this is just about 3%, but trending in the right direction. Margins on the enterprise business are better off, so cloud hardware and cloud product business runs at a similar margin as the enterprise, which will be around 6 points, while cloud services business runs at much higher margin in the range of about 25-30%.
- Sarvesh Gupta with Maximal Capital asked if the company believes that enterprise business growing at a faster pace than the mobility business is sustainable. Rajiv Srivastava replied that it’s difficult to say that enterprise will continue to grow faster in Mobility as Mobility is in a very good space right now. The reason being 5G adoption is going to increase and 5G enabled devices are going to increase which will increase mobility.
- Pranav Kshatriya of Edelweiss asked how much time would it take for working capital days to reach through 35-40 days. Rajiv Srivastava said it will never reach and that’s how the company is building its models.
- Nitin Padmanabhan from Investec queried about the contribution of Brightstar on the growth number in the overseas business in 3Q22. Rajiv Srivastava replied that contribution of Brightstar was $35 million because the acquisition happened on Dec. 1, 2022 and the impact is not material at all for now.
- Nitin Padmanabhan from Investec asked about the sustainability of gross margin that’s seen currently. Rajiv Srivastava answered that the situation of the global supply chain industry on the technology front continues to be favorable right now. This makes the whole ecosystem far more liquid and profitable. The company added that its gross margin situation will continue to be where it is.
- Nitin Padmanabhan from Investec also asked about the creditor, inventory and debtor days for 3Q22. S.V. Krishnan CFO said that the debtor days for 3Q22 is about 48 days, inventory days about 22 days and creditor days at 58 days, taking the net working capital to 12 days.
- Deepak Khatwani of Girik Capital asked about any growth target in mind for the company on a consolidated global level. Rajiv Srivastava answered that the company has a double digit growth target, but exact number cannot be given.
- Dhaval Shah with Svan Investment asked about the India revenue and the reason for de-growth and what kind of incremental growth 5G can add to the company’s top line. Rajiv Srivastava said India revenue is INR7,157 crores for 3Q22 and the reason for de-growth was the mobility business. The company added that 5G is going to be a game changer for a lot of industries and REDINGTON is going to be a strong player in the cutting edge technologies at any point of time.
- Faisal Hawa with H.G Hawa asked about what is the share of Apple revenues as a percentage of total revenue and how much of the revenue is cloud in 3Q22. Rajiv Srivastava said that the contribution of Apple iPhone to revenue at a consolidated level is about 20%. On cloud, revenue for 3Q22 was INR411 crores from a total revenue of INR16,620 crores. The company’s hope is to get towards a 10% contribution over time.