Redington Ltd - All-round beat | Q1FY27 Company update

Redington’s Q1FY27 results were ahead of our estimates across all parameters. The company delivered another strong quarter, driven by broad-based growth across India (63% YoY), robust execution in large enterprise and data center projects (Rs 10bn) and continued momentum in the Cloud and Software businesses (52% YoY). India remained the primary growth engine, while the ME business proved more resilient than expected despite ongoing geopolitical challenges. Growth was supported by premium mobility, AI PCs, hyperscaler infrastructure and SSG, with higher ASPs contributing the bulk of growth while volume growth remained in the mid-single digits. EBITDA margins improved sequentially, aided by lower other expenses, primarily due to reduced provisions and freight costs in ME. The management remains optimistic on FY27, supported by a healthy data center pipeline, rising AI infrastructure demand and continued expansion in Cloud and Software. We raise our earnings estimates by 9.4%/10.9% for FY27E/28E to factor in higher ASP growth. We maintain our target multiple of 12x.

Revenue driven by broad-based growth across segments:

Redington reported strong operational performance in Q1FY27, with revenue growing 5.1%/34.6% QoQ/YoY driven by healthy execution across all business segments and geographies. India remained the primary growth engine, supported by strong demand across premium mobility, enterprise infrastructure, cloud and software solutions. Middle East & Africa (MEA) revenue grew 15% YoY, despite continued geopolitical disruptions, as robust growth in GCC and Africa offset weakness in UAE and Saudi Arabia. Mobility revenue grew 21% YoY, Endpoint Solutions Group (ESG) increased 35% YoY, Technology Solutions Group (TSG) delivered 50% YoY growth, while Software Solutions Group (SSG) recorded the strongest performance with 52% YoY growth. The company executed approximately Rs 10bn of large data centre deals during the quarter, including nearly Rs 7bn in India.

Margins supported by operating leverage despite higher investments and geopolitical costs:

Redington maintained healthy profitability during the quarter. Operating leverage improved as operating expenses grew slower than revenue, while ROCE remained strong at 22%. Working capital improved significantly to 32 days versus 37 days in Q1FY26. However, inventory levels continued to rise across the industry due to component shortages. The management indicated that working capital requirements are likely to remain elevated through FY27, driven by higher inventory, large enterprise projects and extended customer credit cycles.

AI infrastructure, SSG strengthen long-term growth visibility:

Redington continues to witness robust demand across hyperscaler infrastructure, enterprise cloud, cybersecurity and AI-led solutions. The management highlighted that India's data centre investments continue to accelerate supported by neo-cloud operators and favourable government policies. SSG continues to scale rapidly driven by cloud and cybersecurity. During the quarter, the company launched AI Exchange, a marketplace offering over 250 AI agents along with new digital capabilities including ‘Track My Cloud’ and an automated subscription renewal platform. Cloud revenue grew 67% YoY, reinforcing the management's confidence that SSG will continue increasing its contribution to overall revenues. We expect SSG to contribute 20%+ revenue (17% in Q1) in FY27E.

Valuation, View and Risk:

We have raised our estimates for FY27E/28E earnings estimates by 9.4%/10.9% to factor in higher ASPs across segments along with large deal momentum. We have maintained our target multiple of 12x, arriving at a TP of Rs 425 (vs 340). We expect Redington to deliver Revenue/EBITDA/PAT CAGR of 18.8%/25.3%/30.2% over FY26-FY29E, supported by strong momentum in India, scaling cloud & software businesses and growing hyperscaler/data centre opportunities . Key risks include prolonged geopolitical disruptions in the Middle East and continued losses or further deterioration in the Arena/Turkey business.

Company website: https://redingtongroup.com/

*CMP is as per report published date

Click to download the full Redington Ltd Q1FY27 Company Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

Open your MNCL Demat Account

Frequently Asked Questions (FAQs) on Redington Ltd Q1FY27 Company Update

Redington's latest quarterly performance highlights strong execution across technology distribution, cloud, software and AI infrastructure. Below are answers to frequently asked investor questions based on our institutional research update.

1. What is the latest rating on Redington?

We maintain a Buy rating on Redington with a target price of ₹425, supported by healthy earnings growth, strong execution and expanding opportunities in AI infrastructure.

2. What drove Redington's Q1 FY27 performance?

Growth was led by strong demand across India, enterprise infrastructure, cloud services, software solutions and large data centre projects, alongside resilient performance in the Middle East and Africa.

3. Why is AI infrastructure important for Redington?

Growing investments in AI, hyperscale data centres, cloud computing and enterprise digital transformation are expanding Redington's addressable market and supporting long-term revenue visibility.

4. What are the company's key growth drivers?

Cloud and Software Solutions Group (SSG), AI infrastructure, cybersecurity, premium mobility, enterprise IT solutions and hyperscaler partnerships remain the primary growth catalysts.

5. What risks should investors monitor?

Key risks include prolonged geopolitical disruptions in the Middle East, higher working capital requirements, inventory-related challenges and slower execution of large enterprise projects.

Before You Trade, Strengthen Your Foundations with These Guides

• For a stronger understanding of indicators such as RSI, VWAP, and trendlines, check our 👉 Technical Analysis Fundamentals section.
• Want to refine your risk-reward planning? Explore our insights on 👉 Position Sizing & Risk Management Strategies.
• Click here for Redington Ltd. research reports, stock price chart and more