Maintaining FY22 guidance of topline of over Rs 100 bn – Dixon Technologies

Update on the Indian Equity Market:

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Excerpts of an interview with Mr. Atul Lall, MD, Dixon Technologies (DIXON) with CNBC -TV18 dated 26th March 2021

• He estimates FY21 revenue to be around Rs 62-63 bn, which is a decent growth over last year’s revenue of almost Rs 44 bn. They will also have growth in profitability. 
• This is despite Q1 being a complete washout because of the pandemic. In FY22, they are targeting very aggressive growth. 
• He had previously mentioned a revenue estimate of Rs 100 bn plus in FY22 and a significant increase in the bottom line as well. They still stand by the same; possibility they will do even better.
• He expects the EBITDA margins to remain in the range of 4.4-4.5 percent going ahead on the back of the product mix. He is also expecting a 25-30 percent CAGR run-rate in topline post FY22.
• He expects Capex to be ~2,500-2,600 mn in FY22 and he expects FY22 to be a solid growth year for the company.
• He said that commodity price rise is impacting the consumer durable companies.
• They have two kinds of revenue streams. One is an OEM revenue stream wherein they work on a prescriptive basis. All price increases on the commodity side, they have been able to pass on to their principle because that is the way the contracts are drafted.
• He also said that for FY21, Dixon Technologies has met the eligibility criteria on investment and revenue threshold for handset manufacturing PLI. However, they have not yet heard from the government.

Asset Multiplier comments:

• The COVID-19 pandemic has left a lasting impact across all walks of life, and the electronics industry is no exception as it has also suffered a decline in growth. This is a temporary phase – especially for consumer electronics and appliances – as some of these devices have grown to be an integral part of our lives.
• The electronics industry is basically divided into two categories—industrial electronics and consumer electronics. The latter has witnessed more growth than the former due to its popularity among consumers and because of more foreign direct investment in it. 
• The industrial electronics segment in India is still facing challenges because of various taxation policies and the lack of an ecosystem for manufacturing components.

Consensus Estimate: (Source: market screener and investing.com websites)

• The closing price of DIXON was ₹ 3,635/- as of 30-March-2021.  It traded at 122x/ 67x/ 49x the consensus earnings estimate of ₹ 29.7/ 54.5/ 74.4 for FY21E/22E/23E respectively.
• The consensus price target is ₹ 3,288/- which trades at 44x the earnings estimate for FY23E of ₹ 74.4/-

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