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Expect a weak Q3 from DataWind, says Haywood

DataWind
DataWind
Suneet Singh Tuli and Raja Singh Tuli, co-founders of Datawind Inc. celebrate the Company’s $30 million IPO at the TSX market open.

India’s currency demonetization is going to do a number on DataWind’s (DataWind Stock Quote, Chart, News: TSX:DW) third quarter, says Haywood analyst Pardeep Sangha.

Next week, DataWind will report its Q3, 2017 results. Sangha expects the company will post an Adjusted EBITDA loss of $2.2-million on revenue of $12.0-million, down 23 per cent from the same period last year.

The analyst says the currency issue will result in a noticeable but brief blow.

“On the back of the Indian government demonetizing the Rs. 500 and Rs. 1000 notes on November 8th, DataWind halted its cash on delivery (COD) sales channel, which had an extremely negative impact on the quarter,” says Sangha. “We expect profitability levels will be restored following the COD sales channel coming back on line. Additionally, we expect margins to improve over the coming quarters through recent vertical integration in the distribution network.”

Tribe

In a research update to clients today, Sangha maintained his “Hold” rating and one-year price target of $1.00 on DataWind, implying a return of 47.1 per cent at the time of publication. The analyst rates the risk on the stock as “high”.

Sangha expects DataWind will post Adjusted EBITDA of negative $3.7-million on revenue of $75.7-million in fiscal 2017. He thinks these numbers will improve to positive EBITDA of $6.4-million on a topline of $98.4-million the following year.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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