The quality of earnings generated by D-Link is good; it's nearly debt-free, and the Promoter has not reduced its stake from 51%. The company has shown consistent profitability and revenue growth, showcasing expansion in the market. Other factors include a healthy and regular dividend payout, showcasing a structured profit-sharing and retention policy, and instilling stability in the company. As its Parent company in Taiwan also experiences a boom, D-Link India will also have intelligence and resources for expansion as opportunities in the Indian market present themselves. D-Link's ROCE is over 30%, which is much better than the industry average of 18.35. The books are consistent, and the management is clear on its objectives. With the expanding Indian market for electronics and networks, D-Link will be able to generate meaningful value for its stakeholders in both the medium and long term. At a 27% 5 year CAGR in Profits, I believe D-Link is an 18 PE can certainly be seen as undervalued, However it is also important to note the 4.0 P/B ratio, which can be seen as a risky trade, however this is due to the low cash ratio as the the company only sits on 80 Cr of cash. I believe the growth prospects and the Taiwanese connection will allow D-Link to grow faster than the industry, and hence I would trade it at a forward PE of 20 at a 15% revenue growth per year in the next 5 years. These are my views and should not be considered an investment recommendation.
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