Reviews

In this edition, we have reviewed Axis Bank Ltd. and Redington (India) Ltd. We suggest our reader-investors to HOLD Axis Bank Ltd. and Redington (India) Ltd. 

We had recommended Axis Bank in Volume 38, Issue No. 10 dated April 10, 2023— April 23, 2023, under the ‘Special Report’ segment. The recommended price for the stock was ₹851.80. We had recommended the stock based on growth in the bank’s loan book, strong digital and technology focus, and improvement in the balance-sheet. Axis Bank, established in 1994, is a new-generation private sector bank in India. It was promoted by SUUTI, LIC, GIC and other entities. As the third largest bank in India, it has a large network of domestic branches, ATMs, and cash recyclers. 

In Q2FY24, the bank, on a consolidated basis, reported a 31.92 per cent increase in interest earned to ₹27,417.53 crore as compared to ₹20,782.80 crore in the same quarter the previous year and sequentially increased by 4.46 per cent. 

The total income of the bank increased by 31.58 per cent to ₹33,122.23 crore as compared to ₹25,173.05 crore in the same quarter the previous year and sequentially increased by 3.85 per cent. The PAT of the bank increased by 10.53 per cent on a YoY basis to ₹6,217.68 crore and increased by 1.95 per cent on QoQ basis. At TTM, Axis Bank is trading at a PB of 2.63 times, which is higher than its industry PB of 1.80 times. The company has maintained a healthy three-year average profit and sales of 80 per cent and 11 per cent, respectively. 

The Q2FY24 performance and balancesheet quality showed significant improvement, with a lower risk-weighted asset intensity, making the bank selfsufficient in capital. Loan growth in all three segments (retail, corporate and MSME) was also seen, with a 9 per cent QoQ increase in the SME book. The bank’s digital and technology adoption focus was strong, with successful partnerships and new product launches. 

The bank’s outlook for the Indian economy is optimistic, with an expectation of 13 per cent banking system credit and deposit growth for the current fiscal. The bank’s core areas of execution include embedding a performance-driven culture, strengthening the core, and building for the future. The financial performance for H1FY24 and Q2FY24 was strong, with improvements in net interest margins and structural NIM drivers. 

The bank’s branch expansion plan is on track, and the cost-to-asset ratio target is around 2.1 per cent for FY25 exit. Hence, we recommend HOLD. 

 

We had recommended Redington (India) in Volume 38, Issue No. 11 dated April 24, 2023—May 7, 2023, under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹168.20. We had recommended the stock based on revenue growth, new products and improving margins. Redington (India) Limited, established in 1993, is a leading distributor of technology and communication products and services in emerging markets. The company offers a wide range of products, including PCs, notebooks, tablets, printing solutions, servers, storage, software, networking solutions, security solutions, smart phones, and cloud options. Redington has a strong network of channel partners. It is expanding its coverage of technology distribution value chain through new technologies like AI, robotics, big data, IoT and 5G communications. 

In Q2FY24, Redington (India)’s consolidated revenue increased by 16.64 per cent at ₹22,220.15 crore as compared to ₹19,050.74 crore in the same quarter the previous year. On a QoQ basis, its revenue increased by 4.88 per cent. The PBIDT excluding other income increased by 14.85 per cent to ₹481.43 crore as compared to ₹419.18 crore in the previous quarter the same year. On a YoY basis, it decreased by 9.58 per cent. The company’s net profit stood at ₹311.64 crore as compared to ₹255.20 crore, a QoQ increase of 22.12 per cent, while on a YoY basis it decreased by 20.48 per cent. 

At TTM, the shares of Redington (India) are trading at a PE of 11.12 times, which is lower than its industry PE of 51.4 times. The company has maintained a healthy three-year average ROE and ROCE of 21 per cent and 24.2 per cent, respectively. It has a three-year compounded sales and profit growth of 16 per cent and 39 per cent, respectively. The company has a debt-to-equity ratio of 0.48 times with an interest coverage ratio of 0.47 times. The company is experiencing positive growth in India, the UAE and Saudi Arabia, with significant opportunities in the technical solutions group and cloud. 

It has also introduced new products in the mobility category and achieved the highest revenue and gross margin for any quarter in Q2FY24. The company is focusing on investment in digitalisation and B2B platforms, aiming to maintain capital efficiency and grow its market share. Geopolitical factors are causing stress in Africa, and the company is taking a cautious approach to navigate these markets. The financial performance is improving, with a focus on maintaining EBITDA margins of 2.4 per cent to 2.5 per cent and improving gross margins. Hence, we recommend HOLD. 

(Closing price as of January 20, 2024)