Expect a weak Q3 from DataWind, says Haywood

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.”

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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