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Wednesday, January 4, 2012

Ricoh India Ltd:-Buy/sell/growth prospects and recommendation,news and results,target and analysis,view and outlook,multibagger

Scripscan:Ricoh India Ltd

Dipaksen says:Ricoh India Limited (RIL) is one of India’s leading sellers of office automation equipment like copiers, printers and multifunctional devices. It is the subsidiary of Ricoh, Japan, one of the world’s leading players in the office automation industry. The parent company owns 73.9% of the equity of Rs 39.7 crore.The Indian office automation market is one of the fastest growing in the world and being driven mostly by BFSI sector (banking/financial service/insurance etc). The Industry in all likelihood will continue to grow in foreseeable future.Ricoh (Japan) used to operate two units in India , Ricoh India and Gestetner India ( manufacturer of duplicating machines). Few years back, Gestetner India was merged into Ricoh India. The duplicating division was closed and all the employees were given VRS. The cost of closure was charged in the accounts of Ricoh India already. The goodwill arised out of merger was written off in the accounts and as on 31.3.09, entire Goodwill amount was already written off in the accounts.One interesting aspect of sales mix of Ricoh is that over the years, the share of service revenue as compared to the revenue from products sales are increasing. This is interesting as the service division enjoys higher EBITDA margin as compared to the margin from product sales. Ricoh will benefit from higher sales of consumables like toners, cartridges and also from higher fees from annual maintenance contracts.Ricoh looks more attractive from the balance sheet point of view. It’s debt free , Fixed assets are almost depreciated. As it imports most of its products, its capex requirements are very negligible. Working capital requirements are moderately high due to large Govt sales.Now going forward, Ricoh is expected to report EBITDA of Rs 25-35 crore/year. With negligible capex and working capital requirement, there will be free cash flow of 12-18 crore/year (after paying of the corporate tax at full rate).Ricoh’s current market capitalization is at Rs 100 Crore ( at its current market price of 27 Rs ). Mkt cap to expected free cash flow is at 5 times, and is quite attractive.Ricoh is also a possible delisting candidate primarily because of two reasons.1)Outside Japan, it is the only other listed entity of Ricoh group.2)Given the current free cash flow generation, Ricoh India will have significant amount of cash in the balance sheet over next 1-2 years and that may prompt the parent company to go for delisting.Ricoh is a compelling value buy at the current price of Rs 27 and we may expect a 30-40% return over a period of 15 to 18 months.

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