Set to deliver robust PAT growth D-Link :: ICICI Securities, PDF link

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Set to deliver robust PAT growth
D-Link stock continues to enjoy investor interest which is visible by the
20% rally in the stock in the past two months. The renewed focus by the
government on extensive use of technology for improving connectivity at
the pan India level has led to the 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 Q2FY15 performance was
decent with 17.4% YoY growth in the revenues. The dip in the EBITDA
margins was due to certain one time items and we expect margins to inch
back to Q1FY15 levels by the next quarter. The company continues to
expand its product portfolio which would further aid revenue growth.
Owing to the continued robustness in operations, D-Link is expected to
post revenue, EBITDA and PAT growth of 18.9%, 48.3% and 51.2%
FY14-17E CAGR to | 817.5 crore, | 71.0 crore and | 47.2 crore by FY17E
respectively. We re-value the stock at 14x FY17E P/E arriving at a revised
target price of | 185 and maintain BUY.
Dip in margins in Q2FY15 is not structural
D-Link displayed robustness in operational performance posting a stellar
17.4% YoY growth in the revenues to | 140.7 crore. The EBITDA came in
at | 7.2 crore, lower than our expectations of | 9.5 crore, due to higher
provisioning on account of leave encashment. However, the dip in
margins is not structural and they will transcend back to previous levels.
Going ahead, with the currency stabilizing at ~| 60 levels the raw material
costs are expected to remain at a steady state thus leading to gross
margin expansion to 20.3% in FY17E from the 16.5% in FY14. We expect
D-Link to post a 48.3% EBITDA CAGR in FY14-17E to reach | 71.0 crore in
FY17E from | 21.7 crore in FY14.
Share issue to Team F1 Networks Private Limited…
D-Link had in the past quarter issued 55 lakh shares to TeamF1 Networks
Private Limited in exchange of the 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 synergizing 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
Although the stock has rallied 386% since the start of this fiscal, we
remain bullish on the stock on account of renewed focus of the new
government on broadband connectivity. The new government aims to set
up a National Optic Fibre network up to the village level and also establish
Wi-Fi in public zones. D-Link is very well placed to zero in on the
upcoming internet boom in India with its portfolio of innovative product
offerings. D-Link is expected to post revenue, EBITDA and PAT growth of
18.9%, 48.3% and 51.2% FY14-17E CAGR to | 817.5 crore, | 71.0 crore
and | 47.2 crore by FY17E respectively. We re-value the stock at 14x
FY17E P/E arriving at a revised target price of | 185 and maintain BUY.

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