Redington is involved in trading business. Usually when you are buying products from manufacturers and selling to other businesses (B2B), you will never have power on margin growth.
Why? Because anyone can trade similar products (no distinction). The only distinction is the price per product (due to the quantity you buy).
Let’s say Redington can trade a smartphone for Rs. 10,000. Other players can trade the same smartphone at a price of Rs. 10,150. Redington cannot say “hey, I am Redington, Take my smartphone for Rs. 15,000”.
When margins are low, what to see instead?
The answer is, Efficiency Ratios. Take a look at Inventory Turnover, Asset Turnover etc. Another thing to see is the working capital needs (Inventory, Trade Receivables, Trade Payables, Cash Conversion Cycle).
Hope this helps!
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