IGI Logo

Revenue rose 120% YoY to INR 21828mn led by 200% increase in LED TV revenue. Gross margins dropped 320bps to 9.6% largely due to increase contribution from LED TVs in revenue mix to 62% from 46% a year ago. Despite steep fall in gross margins, EBITDA margin fall was softer as operating leverage played out. PAT witnessed 135% rise & stood at INR 615mn. EBITDA margins of LED TV rose 40bps to 2.9% & that of LED Lights 90bps to 9.5%. In case of Washing Machine SBU, EBITDAM dropped 330bps to 10.2% primarily on account of steep increase in input costs that couldn't be fully passed on to the customers. Again, this SBU works 100% on ODM basis. Hence, entire volatility in input costs has to be borne out by Dixon.

Revenue rose 120% YoY to INR 21828mn led by 200% rise in LED TV

SBU revenue 200% revenue growth registered by LED TV SBU primarily drove 120% YoY revenue growth for the company to INR 21828mn. Revenue of LED Lights rose 26% and Washing Machines rose 68% to INR 3486mn &1152 mn respectively. In case of Mobile phones, revenue rose 115% YoY to INR 299mn & that of Security Systems 10% to INR 56mn.

Gross profit rose 64% YoY to INR 2088mn

Gross margins dropped 320bps to 9.6% largely due to increase contribution from LED TVs in revenue mix to 62% from 46% a year ago. Despite steep fall in gross margins, EBITDA margin fall was softer as operating leverage played out. PAT witnessed 135% rise & stood at INR 615mn. EBITDA margins of LED TV rose 40bps to 2.9% & that of LED Lights 90bps to 9.5%. In case of Washing Machine SBU, EBITDAM dropped 330bps to 10.2% primarily on account of steep increase in input costs that couldn't be fully passed on to the customers.

Outlook & Valuation

Management is very upbeat about growth prospects of Mobile business under recently introduced PLI scheme. It has already tied up with Nokia & Motorola for manufacturing mobile phones for their domestic as well as global requirements. We introduce FY23 financials & fine tune FY21 & 22 financials in the backdrop of aggressive growth in LED TV business. We estimate Revenue & PAT to compound annually at 53% & 55% respectively during FY20- 23. Dixon is a leading player in EMS segment across LED TVs, WMs & LED Lights with dominant market shares. Again, cash surplus BS as well as Free Cash Flow (FCF) generating nature of operations should enable it to grow inorganically as well as by adding new product categories (presently considering refrigerators). We maintain HOLD on the stock with revised PT of INR 16500 (50x average FY22E & 23E EPS) considering significant increase in revenue visibility across major SBUs.

Key Risks

* Raw Material/Component supply chain is at risk with recent disruption due to India China trade tensions

* Steep increase in input costs

To Read Complete Report & Disclaimer Click Here

Above views are of the author and not of the website kindly read disclaimer