On the back of COVID impact, Revenue fell 55% YoY to INR 5,169mn & EBITDA 68% to INR 169mn. However, Gross margins rose by an impressive 60bps to 12%. EBITDA margin fall was due to under absorption of overheads with production volumes remaining low. PAT registered a steep fall of 93% to INR 16mn. EBITDA margins of LED TV rose 30bps to 2.5% & that of LED Lights fell 30bps to 7.5%. Washing Machine SBU witnessed steep fall in EBITDA margin to the tune of 910bps to 1.7%.
Revenue dropped 55% YoY to INR 5,169mn
On the back of COVID impact, Revenue fell 55% YoY to INR 5,169mn. Revenue of LED TV dropped 32% YoY to INR 3,473mn & that of LED Lights and Washing Machines dropped 76% each to INR 777mn & 241mn respectively. In case of Mobile phones, revenue fell 63% YoY to INR 531mn & of Security Systems 80% to INR 134mn.
Gross Margin rose by an impressive60bps YoY to 12%
Gross margins rose by an impressive 60bps to 12% whereas EBITDA margins fell to 3.3%, down 130bps.Staff cost as a % of revenue rose 130bps to 3.8%. Similarly, Other Expenses as a % revenue rose to 4.9%, up 50bps. PAT registered a steep fall of 93% to INR 16mn.EBITDA margins of LED TV rose 30bps to 2.5% & that of LED Lights fell 30bps to 7.5%. Washing Machine SBU witnessed steep fall in EBITDA margin to the tune of 910bps to 1.7%.PAT registered a steep increase of 68% to INR 275mn despite COVID impact of INR 70mn during the quarter.
Outlook & Valuation
We have kept our earnings estimates unchanged. Revenue & PAT are estimated to compound annually at 18%&48% respectively during FY20- 22. Dixon is a leading player in EMS segment across LED TVs, WMs & LED Lights with dominant market shares. Rising contribution to revenue from ODM segment & richer product mix should enable it to expand profitability. Again, cash surplus BS as well as Free Cash Flow (FCF) generating nature of operations should enable it to grow inorganically by adding new product categories (presently considering refrigerators and fans). At INR 7,700, the stock is trading at 23.4x FY22E EPS & we downgrade the stock to SELL fromHOLD on the back of steep run up in price with PT of INR 5,700, 25x FY22E EPS.
* Raw Material/Component supply chain is at risk with recent disruption due to India China trade tensions
* Volatility in input costs
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