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Revenue rose nearly 3x YoY to INR 18673mn, albeit on a lower base due to nationwide lockdown corresponding quarter last year, led by 264% increase in LED TV revenue. Gross margins dropped 460bps to 7.4% driven by steep increase in input costs that could not be passed on fully in Lighting & Home appliances business verticals that essentially work on ODM basis. Fall in gross margins percolated down to EBITDA level driving margins to 2.6%, down 70bps. However, on an absolute basis, EBITDA nearly doubled to INR 479mn. PAT rose more than 10x to INR 182mn. EBITDA margins of LED TV remained stable at 2.4% whereas in case of LED Lighting business, EBITDA fell 300bps to 4.5% led by lower operating leverage as well as gross margins.

Revenue rose nearly 3x YoY to INR 18673mn, albeit on a lower base

Nearly 3x revenue growth registered by LED TV SBU primarily drove ~ 3x revenue growth for the company to INR 18673mn.Revenue of LED Lights ~ doubled to INR 1535mn. Though topline growth for the company appears robust, lower base of last financial year due to nationwide lockdown played its role. On a QoQ basis, the company's revenue dropped 12% due to localised nature of lockdown during the quarter. June month has witnessed recovery in operations & from July onwards, operations have returned to normalcy. Going forward, growth is estimated receive further traction with robust increase in order book across SBUs.

Gross margins dropped 460bps to 7.4% driven by steep increase in input costs

Gross margins dropped 460bps to 7.4% driven by steep increase in input costs that could not be passed on fully in Lighting & Home appliances business verticals that essentially work on ODM basis. Fall in gross margins percolated down to EBITDA level driving margins to 2.6%, down 70bps. EBITDA margins of LED TV remained stable at 2.4% whereas in case of LED Lighting business, EBITDA fell 300bps to 4.5% led by lower operating leverage as well as gross margins. PAT rose more than 10x to INR 182mn.

Outlook & Valuation

Traction in revenue growth of existing businesses is going to be aided by IT hardware, Telecom Products, Room AC (RAC) Printed Circuit Boards (PCBs) businesses in couple of years ahead as Dixon is finalising CAPEX plans under PLI schemes for these business verticals. We revise earnings estimates incorporating revenues for wearable business for FY22 & FY23 & for refrigerators business for FY23 and fine tune earnings estimates of existing business verticals in the light of recent quarter performance. We estimate Revenue & PAT to compound annually at 58% &71% respectively during FY21- 23. We maintain HOLD on the stock with revised PT of INR 4000 (50x23E EPS) considering significant increase in revenue visibility across SBUs.

Key Risks

* Rise in competitive intensity

* Steep increase in input costs

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