Dixon Technologies (India) Ltd. share price target

The domestic manufacturing story is leading the path for Dixon and it sits comfortably with a diversified product mix, client mix and fungible manufacturing facilities which can be adjusted to make use of any unutilized capacity. It has been successful in backward integration, improving operational efficiencies and design capabilities to continue on its growth trajectory. It continues to transition from the OEM model to ODM model of doing business, which should improve its margins going forward. The PLI scheme is another opportunity for Dixon, which can...

We recommend a BUY on Dixon Technologies with a Target Price of Rs 6172, an upside of ~5% from CMP of Rs. 5878 and Stop Loss Rs 5,584.

On the back of COVID impact, Revenue remained flat YoY at INR 8,574mn. But for COVID impact, revenue would have grown 19%. During Q1FY21, Dixon got approved by ICMR for manufacturing testing devices for 27 diseases including COVID & TB marking its entry into medical electronics segment. However, EBITDA jumped 50% to INR 561mn despite absorbing INR 100mn impact of COVID as well as INR 45mn impact of Forex loss. Gross margins rose by an impressive 340bps to 15.8%. PAT registered a steep increase of 68% to INR 275mn despite COVID impact of INR 70mn during the quarter....

Q4 numbers was ahead of estimates (refer Exhibit 4), with strong performance in consumer electronics segments. Margins improved due to stable commodity and higher ODM migration. On the back of a strong Q4, Dixon has crossed 5% margins in FY20. It Rsreported...

Dixon's Consolidated Revenue grew by 25% in Q23Y20 to Rs. 993.8 cr vs. Rs. 794 cr in Q3FY19, driven by strong revenue growth across key segments. The EBITDA grew by 32% to Rs 52 cr vs. Rs 39 cr in Q3FY19

...

Dixons Consolidated Revenue grew by 90% in Q2FY20 to Rs. 1402 cr vs. Rs. 739 cr in Q2FY19, driven by strong revenue growth across key segments. The EBITDA grew by 91% to Rs 63.1 cr vs. Rs 33 cr in Q2FY19, while EBIDA margins stood at 4.5% (4 bps Y-o-Y and 9bps Q-o-Q).

Dixon Technologies (Dixon) is a leading manufacturer of products for consumer durable brands in India. It has ~9.3% share in Electronic Manufacturing Services. We initiate coverage with BUY rating and a target price of Rs 3,649 i.e. 21% upside (implies 32x FY21E)

Strong quarter; Working capital improves; Upgrade back to Accumulate The Q1FY20 results were more than our estimates, and both EBDITA margins and working capital improved, due to strong performance in the consumer electronics segment. Management expects this improvement to continue. As WC improves, debt fell from `1bn to Rs700mn. We expect EPS to grow at a CAGR of 26% over FY19-21E, given strong traction with key customers in its TV and lighting business. The mobile segment should also grow with addition of new customers. Given the better-than-expected Q1...

Dixon has acquired an additional 50% stake in Padget Electronics Pvt. Ltd., the JV for mobile manufacturing in which Dixon already owns 50%. After the transaction, Padget has become a wholly owned subsidiary of the company. Dixon valued Rs270mn as the consideration for the stake, valuing Padget at 2.6x FY19 EBITDA. The net cash payout stood at Rs110mn. The deal should lead to incremental revenues of Rs3.4bn/3.7bn for Dixon's in FY20/FY21E, with EBITDA of Rs84mn/92mn. marquee customer additions will drive revenue sustainability for Dixon. Note that we have now incorporated 100% of Padget Electronics into our estimates....