Dixon Technologies Q1 Results Review - Customer, Product Addition To Drive Robust Growth: Systematix
High asset-turnover (~8x) and low NWC days (7) could drive healthy return ratios, despite low margins.
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Systematix Research Report
Dixon Technologies India Ltd.'s in line Q1 FY24 revenue was mainly driven by the mobile and electronic manufacturing services segment (Rs 17.95 billion, up 38% YoY and 27% QoQ), while Ebitda/profit after tax came below estimates (by 14%/7%) on below expected Ebitda margin (4% versus 4.7% estimated) in all segments.
Management attributes the low margins to soft volumes in most key core segments. However, balance sheet remained healthy with gross debt/equity at 0.14 times and net working capital at negative six days.
Despite the soft demand, management bases its optimistic growth outlook on its robust order book position in all divisions. Customer additions (India and overseas), healthy traction in existing segments (washing machines, smartphones, lighting) and fast ramp up in new segments (telecom hardware, laptops, refrigerators) are slated to drive growth.
Dixon has also identified white spaces in its businesses that it intends to scale.
We retain our estimates post broadly in line Q1 result and estimate 23%/27%/39% compound annual growth rate in revenue/Ebitda/profit afer tax over FY23-25E (FY20-23: 40%/32%/ 28%), with 300-500 bps expansion in its return on equity/return on capital employed/return on invested capital to ~23%/32%/36% in FY25E.
High asset-turnover (~8 times) and low NWC days (seven) could drive healthy return ratios, despite low margins.
Dixon’s scrip has been volatile over last two years due to lacklustre performance, mainly in the Mobile segment.
Demand recovery and new customer onboarding should accelerate growth momentum; 'Buy' with a target price of Rs 4,966 (60 times FY25E earnings per share of Rs 83).
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.