**Dixon Tech** - Q1 FY21 (Unaudited – Cons.)
CMP: 8,000
Total income from operations 517 Cr
1,147 Cr (-54.91%) YoY | 857 Cr (-39.72%) QoQ
Year ending revenue: 4,400 Cr Vs. 2,984 Cr (47.47%)
Net Profit of 1.60 Cr
23.5 Cr (-93.41%) YoY 27.6 Cr (-94.23%) QoQ
Year ending Net profit: 120.5 Cr Vs. 196 Cr (38.74%)
EPS (in Rs.) 1.35
19.94 YoY | 23.51 QoQ
Year ending EPS: 102.70 Vs. 55.95
View: Result is below expectation. YoY and QoQ revenue declined significantly and profit also significantly down. EBITDA margins declined Y-O-Y owing to decline in production and related under absorption of overheads.
**Business Updates & Highlights**:
Q1FY21 EBITDA is around INR 17.1 Cr Vs. 53.1 Cr in Q1FY20 Vs. 55.8 Cr therefore declined by 67.8% in YoY and 69.9% in QoQ. EBITDA margin in Q1FY21 was 3.3% Vs. 4.6% in Q1FY20 Vs. 6.5% in QoQ.
Operating profit margin in Q1FY21 was 3.3% Vs. 4.6% in Q1FY20 declined by 130 bps.
Company is primarily into five business segment viz. consumer electronics – 67%, Lighting Products – 15%, Home Appliances – 5%, Mobile Phones – 10% and Security system – 3%. YoY topline growth for consumer electronic was (32%), Lighting was (76%), Home appliances – (76%), Mobile phones – (63%) and security systems was (80%).
YoY bottom line growth (operating profit) for consumer electronics – (24%), Light products – (77%), Home appliances – (96%), Mobile Phones – (37%) and Security systems – (99%).
**Financial**
ROE and ROCE is around 20.8% and 26.1% respectively and book value per share is around INR 470 and share is currently trading at 17.1x of its book value. Company is currently trading at annualized PE of around 115 which is very high as per Industry benchmark. Promoter holding in the company is around 36.1% which is low but stable. FIIs and mutual fund hold around 12.3% and 21% respectively.
Position: Share strong support price is INR 7500/7000. Long term investor may continue with the company.
**Share View**: Share price high 8,300 (52 week) and now 8,000. Dixon Technologies (India) Limited has been leading the electronic manufacturing services (EMS) space in India. Founded in 1993 and commenced manufacturing of colour television in 1994, Dixon has now expanded its operations to various sub-segments of electronics. Dixon Technologies provides design focused solutions in consumer durables, home appliances, lighting, mobile phones and security devices to customers across the globe, along with repairing and refurbishment services of a wide range of products including set top boxes, mobile phones and LED TV panels.
**Opportunities**
Company business also comprises of Original equipment manufacturer (OEM) as well as original design manufacturer (ODM) further will also take the benefit of Make in India in future for all segment. Samsung, Lava and Dixon have proposed to produce mobile devices and components of over ₹11 lakh crore in the next five years under the government's new Production Link Incentives (PLI) scheme to boost electronics manufacturing. After ban China products and boost local mfg. Business confidence & condition picked up in May & significantly improved in June.
**Risk**
Expensive valuation and high PE. Business was fairly well till March 2020. Significant business disruption due to Covid – 19 outbreak in Q1 and it may impact Q2 as well. Cash conversion cycle is distorted due to weak revenues in Quarter 1 & hence is an aberration & will be corrected in Quarter 2.
Disclaimer: Views are shared based on market research and study and personal in nature. Others can take the different view and opinions. Please do the thoroughly study before enter or exit the shares.