Poised to deliver 20% revenue CAGR in FY14-16E
The D-Link stock continues to enjoy investor interest, visible in the 87%
rally in the stock in the past two months. The renewed focus of the
government on extensive use of technology for improving connectivity at
the pan-India level has led to a re-rating of the stock as D-Link remains a
major beneficiary with its offerings across the active , passive and various
enterprise based solutions. Operationally, the Q1FY15 performance was
stellar with 32.0% YoY growth in revenues and ~115 bps EBITDA margin
expansion. The margin expansion primarily stemmed from currency
stabilisation, which led to softening of its raw material expenses (net of
change inventories). During the past quarter, the company had also
allotted 55 lakh equity shares to shareholders and promoters of TeamF1
Networks Pvt Ltd, consequent to which the said company has become a
wholly-owned subsidiary of the company. D-Link expects to develop R&D
synergies with the help of Team F1, which runs the business of
embedded software engineering and has R&D capabilities in networking
and security. D-Link is certain to benefit from the tie-up but we would
factor the same in our estimates only once consolidated numbers are
reported by the company. Owing to the continued robustness in
operations, D-Link is expected to post revenue growth of 23.0% and
16.5% to | 599.7 crore and | 698.6 crore in FY15E and FY16E,
respectively. We re-value the stock at 7.0x FY16E EV/EBITDA arriving at a
revised target price of | 116 and maintain BUY recommendation.
Robustness in operational performance continues in Q1FY15
D-Link displayed robustness in its operational performance posting a
stellar 32.4% YoY growth in revenues to | 140.7 crore. The EBITDA came
in at | 9.5 crore aided by a reduction in overall raw material costs (net of
change in inventories) and, hence, led to an EBITDA margin expansion of
115 bps to 6.8%. This is the highest margin achieved in the past three
years and does signal a trend reversal. Going ahead, with the currency
stabilising at | 60 levels, raw material costs are expected to remain at a
steady state, thus leading to a gross margin expansion to 19.5% in FY16E
from 16.5% in FY14. We expect D-Link to post 53.7% EBITDA CAGR in
FY14-16E to reach | 51.4 crore in FY16E from | 21.7 crore in FY14.
Share issue to Team F1 Networks Pvt Ltd…
D-Link had in the quarter issued 55 lakh shares to TeamF1 Networks Pvt
Ltd in exchange of 99.99% shareholding (10499 equity shares) of the said
entity. TeamF1 is in the business of embedded software engineering and
has R&D capabilities with expertise in networking and security. D-Link is
expected to benefit in terms of enhanced technological and R&D
capabilities by synergising with this entity. TeamF1 has a rich clientele
base and expanded global reach for its products. D-Link is certain to
benefit from the acquisition. We would, however, consolidate the
numbers from TeamF1 in our estimates only once the company starts
reporting the consolidated numbers.
Maintain BUY; stock re-rated by market
In light of the continued robustness in the operational performance, we
expect revenue & EBITDA CAGR of 19.8% and 53.7% over FY14-16E,
respectively. We re-value the stock at 7.0x FY16E EV/EBITDA arriving at a
revised target price of | 116, which translates to a 12.5x P/E multiple
based on FY16E EPS. We continue to maintain BUY. Some consolidation
may be seen in the short-term. However, in the long term, we expect the
stock to follow an upward trajectory.
��
The D-Link stock continues to enjoy investor interest, visible in the 87%
rally in the stock in the past two months. The renewed focus of the
government on extensive use of technology for improving connectivity at
the pan-India level has led to a re-rating of the stock as D-Link remains a
major beneficiary with its offerings across the active , passive and various
enterprise based solutions. Operationally, the Q1FY15 performance was
stellar with 32.0% YoY growth in revenues and ~115 bps EBITDA margin
expansion. The margin expansion primarily stemmed from currency
stabilisation, which led to softening of its raw material expenses (net of
change inventories). During the past quarter, the company had also
allotted 55 lakh equity shares to shareholders and promoters of TeamF1
Networks Pvt Ltd, consequent to which the said company has become a
wholly-owned subsidiary of the company. D-Link expects to develop R&D
synergies with the help of Team F1, which runs the business of
embedded software engineering and has R&D capabilities in networking
and security. D-Link is certain to benefit from the tie-up but we would
factor the same in our estimates only once consolidated numbers are
reported by the company. Owing to the continued robustness in
operations, D-Link is expected to post revenue growth of 23.0% and
16.5% to | 599.7 crore and | 698.6 crore in FY15E and FY16E,
respectively. We re-value the stock at 7.0x FY16E EV/EBITDA arriving at a
revised target price of | 116 and maintain BUY recommendation.
Robustness in operational performance continues in Q1FY15
D-Link displayed robustness in its operational performance posting a
stellar 32.4% YoY growth in revenues to | 140.7 crore. The EBITDA came
in at | 9.5 crore aided by a reduction in overall raw material costs (net of
change in inventories) and, hence, led to an EBITDA margin expansion of
115 bps to 6.8%. This is the highest margin achieved in the past three
years and does signal a trend reversal. Going ahead, with the currency
stabilising at | 60 levels, raw material costs are expected to remain at a
steady state, thus leading to a gross margin expansion to 19.5% in FY16E
from 16.5% in FY14. We expect D-Link to post 53.7% EBITDA CAGR in
FY14-16E to reach | 51.4 crore in FY16E from | 21.7 crore in FY14.
Share issue to Team F1 Networks Pvt Ltd…
D-Link had in the quarter issued 55 lakh shares to TeamF1 Networks Pvt
Ltd in exchange of 99.99% shareholding (10499 equity shares) of the said
entity. TeamF1 is in the business of embedded software engineering and
has R&D capabilities with expertise in networking and security. D-Link is
expected to benefit in terms of enhanced technological and R&D
capabilities by synergising with this entity. TeamF1 has a rich clientele
base and expanded global reach for its products. D-Link is certain to
benefit from the acquisition. We would, however, consolidate the
numbers from TeamF1 in our estimates only once the company starts
reporting the consolidated numbers.
Maintain BUY; stock re-rated by market
In light of the continued robustness in the operational performance, we
expect revenue & EBITDA CAGR of 19.8% and 53.7% over FY14-16E,
respectively. We re-value the stock at 7.0x FY16E EV/EBITDA arriving at a
revised target price of | 116, which translates to a 12.5x P/E multiple
based on FY16E EPS. We continue to maintain BUY. Some consolidation
may be seen in the short-term. However, in the long term, we expect the
stock to follow an upward trajectory.
link:
http://content.icicidirect.com/mailimages/IDirect_DLink_CoUpdate_August20_2014.pdf
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