ICT vendors -Channel Checks 1.0 -Supply chain shock, limited near-term impact
We engaged with ICT vendors and channel partners to assess the ground-level demand–supply dynamics across PCs, mobiles, and components. Retailer feedback indicates an acute RAM shortage, with prices up ~3x YoY (majority of it coming in Q3) as supply has shifted toward large data centre customers. While distributors have passed on higher prices, end customers are cutting order volumes leading to inventory build-up at channel partners. Storage and CPU supply tightness is also emerging. PC prices are up ~10% QoQ. Elevated PC and memory prices should support margins for Rashi (50%+ PC revenue; 10%+ RAM and storage), while Redington is unlikely to see any negative impact given adequate inventory levels.
Sharp price hikes impacting volumes:
Prices of key PC and server components, particularly storage and memory, have surged with RAM prices surging 2-3x over the past few months. While distributors have largely been able to pass these higher prices to their channel partners, volumes have declined materially due to affordability constraints. While impact maybe lower in Q3 (soft quarter volume-wise for distributors), we could see some negative impact in Q4 unless the supply issue is resolved. There is no new capacity expected for RAMs in CY26, which indicates that the issue could persist for a couple of quarters.
Enterprise, SME and government demand weak; disruption likely to persist:
Enterprise customers are delaying procurement decisions, while SMEs remain cautious due to limited visibility on how long elevated prices will sustain. Even where higher costs are passed through order sizes are being reduced impacting throughput and sales velocity. Government demand has also softened with several GeM orders from recent months either delayed or sent back for budget reallocation. Overall, channel partners expect these conditions to persist at least until March, with improvement dependent on OEM allocation decisions and data centre demand normalization.
Outlook:
Given peripherals account for ~45–50% of Rashi’s revenues, the company should benefit from component price hikes, with higher ASPs supporting margins in H2. Rising PC prices also aid Rashi and Redington (PC contribution: 50–55% and 20–25%, respectively), as we have not seen volume pressure in Q3. The AI PC trend remains muted despite 20–25% YoY price declines. If component prices continue to rise, PC prices could increase 20%+ over CY26, potentially impacting volumes across distributors. We remain constructive on the medium-term refresh cycle, with no structural margin risk, though near-term volumes may remain uneven. We will continue to monitor inventory levels, pricing trends, and OEM supply allocation.
Valuation:
Rashi Peripherals - we are factoring 12.2%/21.5%/14.9% CAGR in Revenue/EBITDA/PAT over FY25-28E; Redington - our estimates are at 14.0%/18.6%/22.1% CAGR in Revenue/EBITDA/PAT over FY25-FY28E. Prefer Rashi Peripherals (as play on refresh / AI PC cycle) and Redington for cloud and software segment. Key risks: prolonged period of elevated RAM prices, slower than expected pick at enterprise segment.
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Analyst:
- Vinay Menon - Research Analyst, Institutional Equities (NISM-201600112117)
- Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)
Frequently Asked Questions (FAQ)
1. What was the objective of the ICT channel checks?
The channel checks were conducted to assess ground-level demand and supply dynamics across PCs, mobiles, and key components by engaging with ICT vendors and channel partners.
2. What is the key supply-side issue highlighted?
An acute shortage of RAM has emerged, with prices rising around 2–3x YoY, largely driven by supply being diverted toward large data centre customers.
3. How have higher component prices impacted PC pricing?
PC prices have increased by approximately 10% QoQ, driven by sharp increases in memory and storage prices.
4. Are distributors able to pass on higher prices?
Distributors have largely passed on higher component prices to channel partners, but end customers are reducing order volumes due to affordability constraints.
5. What has been the impact on volumes and inventory?
Higher prices have led to a material decline in order volumes, resulting in inventory build-up at channel partners.
6. Is the supply disruption expected to persist?
Yes, with no new RAM capacity expected in CY26, the supply tightness and pricing pressure could persist for the next couple of quarters.
7. How is demand shaping up across customer segments?
Enterprise customers are delaying purchases, SMEs remain cautious, and government demand has weakened with several GeM orders being delayed or reallocated.
8. When do channel partners expect improvement?
Channel partners expect the current disruption to persist at least until March, with recovery dependent on OEM supply allocation and normalization of data centre demand.
9. How does this environment impact Rashi Peripherals?
Given peripherals account for around 45–50% of revenues, higher component prices and rising PC ASPs are expected to support margins for Rashi in H2.
10. What is the impact on Redington?
Redington is unlikely to see a negative impact in the near term due to adequate inventory levels and its exposure to cloud and software segments.
11. What is the outlook for PC prices over CY26?
If component prices continue to rise, PC prices could increase by more than 20% over CY26, which may impact volumes across distributors.
12. What is the medium-term view on the ICT sector?
The medium-term refresh cycle remains constructive with no structural margin risk, although near-term volumes may remain uneven.
13. What are the key risks highlighted?
Key risks include a prolonged period of elevated RAM prices and a slower-than-expected recovery in enterprise demand.
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