Company confident of delivering 60-70% CAGR over next 3 years: Dixon Tech
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Company confident of delivering 60-70% CAGR over next 3 years: Dixon Tech
Edited Excerpts of an interview with Atul Lall, Managing Director, Dixon Tech with CNBCTV18 on 24th Dec, 2021:
- According to broker report the company is expected to deliver 60-70% sales CAGR over the next 3 years. Mr Lall stated that the company is confident of delivering these numbers.
- The company has grown from Rs 44 bn in FY20 to Rs 64 bn in revenues in FY21. The company is targeting to reach Rs 110 bn in FY22E even after Jun-21 quarter being weak due to Covid-19. It expects revenue to be in the range of Rs 170 bn in FY23E. He is confident of this aggressive growth and to be in the lead position in its sector.
- On the margin front, FY22E has been extremely difficult year for Dixon, particularly for Original Design Manufacturing business. Softening of commodity prices has been seen both in polymer and metal side over the past few weeks. A decline in the freight cost is also been witnessed recently and is relatively stable at present.
- In B2B (Business to Business) there is a lag in passing off the cost increases to the customers. Company expects to pass on the price increases by next (Mar-22E) quarter but in the Dec-21 quarter the margins are expected to be under pressure.
- The chip shortage situation has improved slightly but the situation is not fully under control. Most of the companies including Dixon have aligned their forecasting, have started building more inventories and are well aware of the longer lead times. The production situation is much better but the chip shortage problem has not been resolved yet.
- There was a Directorate of Revenue Intelligence (DRI) survey in Tirupati plant and corporate office pertaining to Television vertical. The issues raised by DRI were interpretational in nature. The company extended all the possible support to the officers and the company is committed to defend its stand in front of DRI.
- Focus of FY22E – Dixon has got into Mobile vertical and it is expected to be the growth driver going forward and to contribute significantly to the total revenue of the company.
- Dixon has got into a Joint Venture with Bharti and have got the approval under the telecom verdict to manufacture consumer premises devices. It is expected to start manufacturing from Mar-22E quarter for Airtel. In FY23E a huge ramp up is expected by the company from Mobile vertical.
- Dixon have tied up with some major customers for manufacturing IT products, a ramp up in its production is expected.
- Dixon have launched fully automatic top loading machines which is expected to contribute to the growth from FY23E.
- Dixon is also rolling out Refrigerator products, the production of the same is expected to start from 4QFY22E. A reasonably good growth is expected to be seen from the existing verticals.
- Under the PLI scheme: The company have started production and investment on IT hardware side, telecom Side and white boards. Backward integration for lighting products under PLI scheme is under process. Company expects to start the production of components of lighting products from 1QFY23E.
Asset Multiplier Comments
- We think Dixon is one of the largest beneficiaries of the government’s PLI scheme and new segments such as electronics/IT products, telecom products and LED lights & AC component will help the company to achieve its target of 60% CAGR for over next 3 years.
- Domestic mobile production is set to grow under PLI scheme. We believe Dixon is one of the main beneficiaries which will drive future revenue for Dixon.
Consensus Estimate (Source: market screener and investing.com websites)
- The closing price of Dixon Tech Ltd was ₹ 5,617/- as of 27-Dec-21. It traded at 127x/72x/52x the consensus EPS estimate of ₹ 44.2/77.7/108 for FY22E/ FY23E/FY24E respectively.
- The consensus target price of ₹ 5,079/- implies a PE multiple of 47x on FY24E EPS of ₹ 108/-.
Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”
