Started in 1988, Mumbai based DC Infotech Ltd is engaged in reselling and distribution business of computers, and computer peripherals. The company operates on a broad-based distribution model where it deals with multiple brand strategy and different products. DC Infotech supplies IT products such as networking, security, firewall's, desktop virtualizanion, broadband, surveillance, wireless, digital signage, power solutions and others like cloud security, digital performance, network performance, and enterprise security. DC Infotech is an IT Solution distribution house in India. Currently, it has 1600 dealers across the country offering a wide range of hardware and software IT products. The company works as a middle man between users & resellers and IT manufacturers/ developers. The company also provides demand generation, after-sale support, logistics services as well. It has 2 offices located in Maharashtra and 8 Warehouses across different states in India. DC Infotech purchases IT products in bulk from vendors and sells them to channel partners (systems integrators, retailers, corporate resellers, etc). The company supplies both the Value Business and Volume business products to corporate/large businesses and vendors. Some of the vendors are:Netgear, Zscaler, D-Link, Samsung, Aten, Avnet, Netscout, Riverbed, Delta Power Solutions, Sonicwall, Ncomputing On a restated basis, for the last three fiscals, DC Infotech has posted turnover/net profits of Rs. 108.79 cr. / Rs. 0.90 cr. (FY17), Rs. 97.56 cr. / Rs. 1.30 cr. (FY18) and Rs. 114.07 cr./ Rs. 1.34 cr. (FY19). For Q1 of FY20, it has clocked in the net profit of Rs. 0.91 cr. on a turnover of Rs. 36.49 cr. Super increase in bottom line in Q1 of FY20 raises concern. For last 3 fiscals, DC Infotech has posted an average EPS of Rs. 3.48 and average RoNW of 9.42% respectively. The issue is priced at a P/BV of 1.02 on the basis of its NAV of Rs. 44.08 post issue. If we annualise Q1 FY20 earnings and attribute it to post issue paid-up equity capital then asking price is at a P/E of around 7.46 against the industry average of 18.59 as per RHP. As per FY19 earnings, P/E is around 20. Comparison between peers is shown in above table, but they are not strictly comparable. On BRLM's front, for Fedex Securities Private Limited this is the 10th IPO in the last three fiscals. Out of the last 9 listings, 2 issue opened at a discount or on par and the rest with premium of 2% to 50% on the day of listings. As of now from last 9 listings, three is trading above issue price and remaining below issue price. (11.12.2019) DC Infotech has average financials, RoNW is 9.42% and issue looks very fully priced as per FY19 earnings. Super earnings of Q1 FY20 raises concerns, and if company can maintain same growth in future also. Also this segment is the facing very tough competition from online retailers. Performance of BRLM is average. Considering all these, we give 'NEUTRAL' rating to this SME IPO.
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