#DLINKINDIA is Near to Break Previous All Time High
- Company has reduced debt.
- Company is almost debt free.
- Company has delivered good profit growth of 28.0% CAGR over last 5 years
- Company has been maintaining a healthy dividend payout of 39.8%
Strengths:
Established market position and strong distribution network: D-Link is the market leader in switches and wireless local area network (WLAN) products, with a significant market share. 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 has invested in state-of-the-art support infrastructure for both consumers and enterprises, which includes 10 D-Link-owned service centres with more than 50 experts in tier 1 cities, over 23 partner service centres with more than 40 experts in tier 2 / tier 3 cities, partner collection points in more than 105 cities and logistical support in over 190 cities. D-Link Technical Support Centres (DTSC) are manned by over 30 highly skilled engineers providing L1 to L3 support for all retail and enterprise customers.
Healthy financial risk profile: Networth was Rs 363 crore as on March 31, 2023, and is expected to increase over the medium term because of steady accretion to reserves and absence of debt repayment. Return on capital employed improved to 36% in fiscal 2023 as profitability increased. In the absence of any debt-funded capex, the financial risk profile is expected to remain healthy over the medium term.
Weaknesses:
Exposure to intense competition and risks inherent in the networking industry: 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. Profitability in the retail segment is constrained by intense competition and commoditised products.
Susceptibility to volatility in input price and currency: Copper, the key input for manufacturing cables is an open market commodity traded globally on exchanges, leading to volatility in its prices. Furthermore, fluctuations in currency also impact profitability, as the company imports about 30% of its traded products. Complete and immediate passing on of cost increases is difficult given the competitive pressure. The company experiences lag of 45-60 days in passing on price hikes. Hence, the operating margin will remain susceptible to fluctuations in raw material prices and currency. D-Link hedges currency exposure up to 70% of the total exposure by entering forward contracts.
Liquidity: Adequate
Cash accrual, expected at Rs 65-75 crore in fiscals 2024 and 2025, will support liquidity in the absence of any capex or debt obligation. Unutilised bank limit of Rs 10 crore will be adequate to fund the company’s fixed expenses. Cash surplus is expected to remain healthy over the medium term.
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