Buy D-Link India; target of Rs 110: ICICI Direct
ICICI Direct’s research report on D-Link India
We met the management of D-Link India (D-Link) to get an update on its business and growth plans ahead. The company, which had faced hiccups in the form of product obsolescence in FY17 (network transition from 3G to 4G) and GST led hiccups in FY18, is back on the growth recovery path. The management indicated that while the recent rupee depreciation is likely to impact margins by ~100 bps in the coming quarter, the company would offset the same through some price hike ahead, given the cushion of price cuts taken last year on the back of GST benefits pass through. Going ahead, the company is confident of a healthy growth trajectory, driven by traction in passive products.
We realign our estimates given the revised duty structure and present growth commentary. We expect D-Link to post consolidated revenue, EBITDA and PAT growth of 10.8%, 50.1% and 43.8% CAGR in FY18-20E to Rs 808.5 crore, Rs 41.1 crore and Rs 26.2 crore by FY20E, respectively. The stock continues to be available at an attractive valuation of 11.5x FY20E EPS. We value the stock at 15x FY20E EPS of Rs 7.4 and arrive at a revised target price of Rs 110. We maintain our BUY rating on the stock.
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