Hello Sir,
Hope you are doing well.
Recently, I came across a stock by the name of D Link India. I think even you might be aware of the brand as it's a leading wi-fi router seller in India.
While going through the details, I was pleasantly surprised by the performance as the company has been performing well over the past few years and is cash rich.
Below, we have shared notes from the Jun'22 CRISIL credit report of the company. Hope you find the details useful in your search of investment opportunities.
Before that, a few days back we released our New Stock Recommendation for Alpha and Alpha + Members
It's a minerals processing company, largest in its segment, has captive raw material sources, grown PAT by ~300% in the last few years, de-leveraging balance sheet, 2nd generation promoters and available at around ~7 times post-tax earnings
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D Link India - Notes from Jun'22 CRISIL credit rating report
- About - Incorporated in 2008, D-Link is a step-down subsidiary of D-Link Corporation. The company markets networking products of the parent and procures from third-party vendors
- D-Link is the market leader in switches and wireless local area network (WLAN) products, with a significant market share
- The product profile comprises network switches, wireless local area networks, routers, modems, storage devices, copper and fibre cables and cameras. In 2010, D-Link began marketing structured cabling products procured from third-party vendors
- In fiscal 2019, the company introduced a series of high-end products for its enterprise business, including unmanaged long-term Power over Ethernet (PoE)/PoE plus switches; new generation layer 3 stackable managed switches with advance hardware and software enhancements for better performance, flexibility and ease of management; and industrial grade switches
- D-Link mainly operates in the home and small and medium enterprise segments of the networking industry, where profitability is lower than that in the institutional sales segment.
- The latter is dominated by Cisco India and other new entrants in the industry. Profitability in the retail segment is constrained by intense competition and commoditized products
- About parent company - D-Link Corporation, founded in 1986, is a multinational company that designs, markets and manufactures networking equipment and has presence across over 100 countries
- Performance - The operating performance of D-Link improved, as reflected in 26% revenue growth in fiscal 2022 compared with the previous fiscal, backed by pent-up demand for information technology hardware products following the Covid-19 pandemic. The company benefitted from opening of commercial offices and easing logistics
- D-Link maintains a healthy liquidity position, as reflected in cash and equivalents of Rs 135 crore as on March 31, 2022
- The company’s revenue is expected to grow steadily at 10% per annum, with the operating margin remaining stable at ~6% over the medium term
- The company continues to face challenges related raw material supply and pricing pressure on account of global chip shortage, exacerbated by geopolitical issues between China and Taiwan as well as the Russia-Ukraine war
- Copper, the key input for manufacturing cables, is an open market commodity traded globally on exchanges, leading to volatility in its prices
- Fluctuations in currency also impact profitability, as the company imports about 30% of its traded products
- D-Link hedges currency exposure up to 70% of the total exposure by entering into forward contracts
- Complete and immediate passing on of cost increases is difficult given the competitive pressure—the company experiences a lag of 45-60 days in passing on price hikes
(End)
Disclaimer: This is not a recommendation to buy/sell D Link India. The securities quoted are for illustration only and are not recommendatory.
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
SEBI Research Analyst Registration No. INH100001690
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