ICICIdirect.com is bullish on D-Link India and has recommended buy rating on the stock with a target of Rs 67 in its June 10, 2014 research report.
"D-Link India's performance has been impressive over the past two years as it registered 47.6 percent and 40.5 percent CAGR in its revenue and EBITDA, respectively, over FY12-14. Going ahead, India is expected to witness a data boom similar to the voice boom in 2008. Total number of internet connections is expected to reach 463 million by FY18E (as per FICCI KPMG). The National Optic Fibre network, as proposed by the new government, will facilitate the New Telecom Policy (NTP 2012) target of 600 million broadband users by 2020. Currently, we have about 55 million fixed and mobile broadband users. We feel D-Link would be a direct beneficiary of such an internet boom with a presence in active, passive and enterprise solutions based offerings. In addition, the government's mission of setting up a National Optic Fibre Network also bodes well for D-Link. We expect revenues to grow at 20.6 percent and 14.4 percent to Rs 586.9 crore and Rs 671.6 crore in FY15E and FY16E, respectively. We value the stock at 4.5x FY16E EV/EBITDA arriving at a revised target price of Rs 67. We maintain our BUY recommendation on the stock."
"The company imports most of the finished goods it sells with raw materials forming about 83.5 percent of total revenues in FY14. The percentage contribution increased from 81.7 percent in FY13 to 83.5 percent in FY14 due to ~16 percent rupee appreciation in the last fiscal. Now that the rupee is seen to stabilise at Rs 58-59 levels, we believe the percentage contribution will again reach 81.6 percent by FY16, hence leading to ~84 bps margin expansion to 5.3 percent by FY16E from 4.5 percent in FY14. In light of the new government's priority to encourage domestic manufacturing for IT related equipments and other required products, we fear that may bring out some policies that may be negative for imports. The company can, however, mitigate the same by setting up manufacturing facilities in India. In light of the expected data boom and the benefits that accrue to the company with the rupee appreciation, we have factored in a revenue and EBITDA CAGR of 17.5 percent and 28.0 percent over FY14-16E, respectively. We have valued the stock at 4.5x EV/EBITDA, hence, arriving at a target price of Rs 67. We maintain our BUY recommendation. There has been speculation about the possibility of delisting, which would support the price, though there has been no official comment from the management," says ICICIdirect.com research report.
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