Diwali Picks 2020 – Samvat 2077

Market Cap Company Reco. (Rs.) Target (Rs.) Upside (%) (Rs. Cr.) 483486 1135 1350 18.9%

ICICI Bank 320247 464 550 18.5%

Bajaj Finserv 99948 6280 7500 19.4%

Pidilite Industries 81307 1595 1920 20.4%

PI Industries 35176 2318 2780 19.9%

Bosch 34511 11701 14100 20.5%

MRF 29688 69999 81000 15.7%

Dixon Tech 11212 9690 11500 18.7%

*CMP as on November 09,2020

1008, Raheja Centre, 214, Nariman Point, -400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 1135 Infosys Ltd. Target: Rs. 1350

Infosys 3Yr. Price Chart Company Overview 1200 BSE Code 500209 1100 NSE Code INFY 1000 INFO IN Bloomberg Code 900 ISIN INE009A01021 800 Market Cap (Rs. Cr) 483486 700 Outstanding shares (Cr) 425.9 600 52-wk Hi/Lo (Rs.) 1186 / 509.25 500 Avg. daily volume (1yr. on NSE) 10471461 400 Face Value (Rs.) 5

Book Value (Rs) 166.7

Feb-18 Feb-19 Feb-20

Aug-18 Aug-19 Aug-20

Nov-17 Nov-18 Nov-19

May-18 May-19 May-20 ➢ Infosys is a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies for their digital transformation. ➢ Infosys reported a 4% QoQ c/c revenue growth, ahead of street estimate. EBIT margins expanded to 25.3%, the highest quarterly margins since Mar’16 levels (up 270 bps QoQ/370 bps YoY) aided by growth leverage, higher offshore mix (up 80 bps), higher utilisation ( up 80 bps) and improved revenue productivity/lower discounts (up 100 bps). ➢ Digital revenues combined with intense client relevance are helping the company to achieve differentiated results in the market. Digital revenues were at $1,568 million (47.3% of total revenues), YoY growth of 25.4% in constant currency. ➢ Infosys, over the past few quarters, has executed well on the basis of healthy large deal wins and traction in digital. Going forward, it is expected that digital revenues to further witness healthy growth on the back of enterprise migrating to cloud. Further, the company is also winning large deals on back of automation, traction in consumer experience & data, core modernisation and cost take outs.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢ Order bookings were strong (including the Vanguard deal) and should help keep the momentum intact notwithstanding the seasonal weakness in 2H. The company has announced large deal wins worth $3.15 billion during the quarter.

➢ Company has raised its FY21 revenue outlook to 2-3% YoY c/c growth (V/s 0-2% YoY c/c earlier) and EBIT margin band to 23-24% noting the strong show in 1HFY21 (24.1%).

➢ Infosys had invested in building digital skills and increasing localization over the past two years. With the investment phase now behind, margins should start to improve. It is focused on strategic margin levers including pyramid optimization, improved onsite mix, lower subcontracting costs and automation. As a result, it is expected that margins to expand going forward.

➢ Infosys to lead the industry on growth with success in strategic priorities viz: scaling digital, large deal success, sales and marketing augmentation driving better account mining and stability in management ranks.

➢ The management of the company remains reasonably optimistic about growth prospects due to increase in win rate and increase in large deal pipeline. These deals will help incentivize its multi-gate servicing capabilities through digital platforms and enhance presence in Europe. Growth in retail is driven by large deal wins, and differentiation on digital deals. Strong order wins coupled with healthy order pipeline would give on visibility of revenue growth momentum.

➢ We believe that Infosys is well placed to gain wallet share within clients led by its cloud offerings, automation-led solutions, digital acceleration, large deal wins vendor consolidation and cost rationalisation remain key long term drivers.

➢ Hence, we hold positive view on the scrip and recommend BUY with a target price of Rs. 1350 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 23.1x on FY22E EPS.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 464 ICICI Bank Ltd. Target: Rs. 550

ICICI Bank 3 year price chart (Rs) Company Overview 600 532174 BSE Code 550 NSE Code ICICIBANK 500 Bloomberg Code ICICIBC:IN 450 ISIN INE090A01021 400 Market Cap (Rs. Cr) 320247 350 Outstanding shares (Cr) 564 300 52-wk Hi/Lo (Rs.) 552.4/269.0 250 200 Avg. daily volume (1yr. on NSE) 35,468,498

Face Value (Rs.) 2

Jul-18 Jul-19 Jul-20

Jan-18 Jan-19 Jan-20

Sep-18 Sep-19 Sep-20

Nov-17 Nov-18 Nov-19

Mar-18 Mar-19 Mar-20

May-19 May-20 Book Value (Rs) 242 May-18

➢ICICI Bank, ’s second largest bank reported strong set of results for September 2020 quarter led by strong commentary on asset quality and domestic loan growth of 10% yoy led by 13% yoy jump in retail loans.

➢Asset quality concerns eased as collection efficiency scaled to ~97% of pre-covid levels

➢Besides, bank has surplus liquidity (current LCR of 150%) and strong capitalization (Tier 1 CAR at 14.9%)

➢Cost of funds at ~4% is one of the lowest among peers and healthy CASA ratio of 42.5% further gives confidence of sustenance

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢Going ahead, as economy scales back to normalcy and bank runs down excess liquidity, loan growth and increase in domestic retail loan mix and scale up of unsecured portfolio would aid NIM gains

➢High PCR of the bank at 78.5% would provide confidence and improvement in asset quality would lower credit costs ahead. Strong liability profile, better asset mix, and healthy capital adequacy ratio will help ICICI bank to come out of this crisis stronger.

➢ROA profile remains strong and will see further improvement driven by higher operating profit (aided by lower cost of funds & operating expenses) and sharp decline in provisions

➢Subsidiaries ICICI Venture Funds, ICICI Pru AMC, ICICI Securities, ICICI Prudential and ICICI Lombard are amongst the leading companies in their respective segments and have also improved profitability in Q2FY21

➢At the CMP, the scrip is trading at 1.8x FY22E BVPS and investors are advised to BUY for a target of Rs 550 from a 12 months perspective.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 6280 Ltd. Target: Rs. 7500

Company Overview 10,500 Bajaj Finserv 3 year price chart BSE Code 532978 9,500 NSE Code BAJAJFINSV 8,500 Bloomberg Code BJFIN:IN 7,500 ISIN INE918I01018 6,500 Market Cap (Rs. Cr) 99948 5,500 Outstanding shares (Cr) 15.91 4,500 52-wk Hi/Lo (Rs.) 10,297/3985.6 3,500 Avg. daily volume (1yr. on NSE) 702,023

Face Value (Rs.) 5

Jul-18 Jul-19 Jul-20

Jan-18 Jan-19 Jan-20

Sep-18 Sep-19 Sep-20

Nov-17 Nov-18 Nov-19

Mar-20 Mar-18 Mar-19

May-19 May-20 Book Value (Rs) 2,117 May-18

➢ Bajaj Finserv (BFS) is a diversified financial services group with a pan-India presence in life insurance, general insurance, and lending

➢ BFS is the holding company for Ltd (BFL), Bajaj Allianz General Insurance (BAGIC) and Bajaj Allianz Life Insurance (BALIC) holding stakes of 54.81% in BFL and 74% each in BAGIC and BALIC

➢ The insurance sector has huge untapped potential and would find greater acceptance post pandemic. Besides, the fundamental factors like expansion of per capita income, under penetration and retiral needs will only gain prominence. Thus, BFS’ subsidiaries - BALIC (sixth largest private insurer) and BAGIC (second largest general insurer) are likely to gain from the opportunity with right mix of products and strategies and tie-ups. The life insurance sector has witnessed a pickup in Q2FY21 with expansion in value of new business (VNB) margins and going head, the momentum is expected to continue

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢ All of BFS’ subsidiaries are well grounded. With economy turning around, BFL being the leader in NBFC space (with AUM > Rs 1 trillion) in consumer finance, SME and commercial lending business, is expected to witness strong traction ahead and get back to growth track. BFL has strong balance sheet, well capitalized and carrying excess liquidity.

➢ For Q2FY21, BFS reported a consolidated PAT of Rs. 986 cr, registering a decline of 18.1% yoy led by higher provisions (largely proactive) of BFL. MTM gains on investments held by BAGIC and BALIC of Rs. 182 cr helped partly offset the dent on profitability. Revenue for BFS grew by 5.8% yoy to Rs. 15,050 cr mainly on the back of improved earnings from its insurance subsidiaries

➢ On subsidiary performance, BFS’ Q2FY21 PAT was aided by BAGIC which reported a PAT growth of 13% yoy to Rs. 332.3 cr on the back of a lower claims ratio and expense control measures adopted by the company. The combined ratio improved to 97.4% in Q2FY21 as against 102.7% in Q2FY20 and AUM grew 14% to t Rs. 20626.2 cr. BALIC reported 53% yoy decline in PAT at Rs 98 c rdue to lower profit on sale of investments and despite growth in its Gross Written Premium (GWP) by 20% yoy to Rs. 2,677.1 cr. BALIC’s renewal business premium was higher 31% yoy & new business premium growth at 11% yoy. Lending business (BFL) reported muted growth in net interest income (up 8% yoy / flat qoq) on growth slowdown, capitalised interest reversal and negative carry (of higher liquidity). Operating profit was higher 15% yoy/flat qoq, however higher provisions dented PAT (down 36% yoy/flat qoq) at Rs 965 cr

➢ BFL is well capitalized and to gain from balance sheet strength and improvement in liability profile and cost savings while insurance businesses have strong structural play and are dominant players.

➢ At the CMP, the scrip trades at FY22E BV of 2.6x and we recommend to BUY for a target of Rs 7500 from a 12 months perspective.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 1595 Pidilite Industries Ltd. Target: Rs. 1920

Company Overview Pidilite 3Yr. Price Chart 1800 BSE Code 500331 NSE Code PIDILITIND 1600 Bloomberg Code PIDI IN 1400 ISIN INE318A01026 Market Cap (Rs. Cr) 81307 1200 Outstanding shares (Cr) 50.8 1000 52-wk Hi/Lo (Rs.) 1709.9 / 1185.55 Avg. daily volume (1yr. on NSE) 849822 800

Face Value (Rs.) 1

Feb-18 Feb-19 Feb-20

Aug-19 Aug-20

Book Value (Rs) 95.2 Aug-18

Nov-17 Nov-18 Nov-19

May-18 May-19 May-20 ➢ Pidilite’s healthy Q2FY21 performance was led by a strong recovery in the domestic business and sharp expansion in EBITDA margin. Growth was largely driven by a strong recovery in its consumer & bazaar (C&B) segment wherein volume & mix were in line with value growth in Q2FY21. Besides, B2B segment recovery was slightly delayed with revenue touching 91% of its pre-Covid level in Q2FY20. A sharp expansion in EBITDA margin was a function of benign raw material prices and saving through various cost optimisation measures. ➢ PIL has signed a definitive agreement with Huntsman Group (USA) for acquiring a 100% stake in one of its subsidiaries in India, Huntsman Advanced Materials Solutions Pvt Ltd (HAMSPL), for Rs. 2,100 crore, valuing the business at EV/Revenue of ~5x and EV/EBITDA of 15x. HAMSPL manufactures and sells adhesives, sealants and other products under brands such as Araldite, Araldite Karpenter and Araseal in India. In addition to business in the Indian subcontinent, the acquisition includes trademark licenses for the Middle East, Africa, and ASEAN. It is expected that the strong margin profile of HAMSPL (in line with Pidilite) and product profile would help expand Pidilite’s product portfolios (in the epoxy adhesive segment) and enhances its geographic presence.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢ Innovation is well ingrained in PIDI’s culture. The company has a knack of identifying user needs and addressing these through product innovations. It follows international markets closely for new developments in its categories and emulates these with commendable adaptation to local requirements. ➢ Demand for consumer & bazaar products remains high in rural and tier-IV towns due to commencement of construction activities (largely one storey/two storey houses were waterproofing and other adhesive products are used). Hence, rural and semi-urban markets recorded double-digit growth with strong demand for construction chemical products. Metros are yet to see demand reach pre-COVID levels but have started seeing a sequential improvement. Once real estate/construction gain some pace in the metros and large cities demand for the construction chemicals products will improve in the coming quarters. ➢ Pidilite has successfully tapped premiumization as a strategy for growth and profitability for its Fevicol portfolio over the past five years. It has managed to upgrade Fevicol SH users to premium products Marine and Hi-Per even in a slowing economy. Relentless focus, sharp communication and adequate marketing of new variants have helped PIDI upgrade users from Fevicol SH (X) to Marine (1.15X) and on to Hi-Per (1.3X). ➢ According to the management, pick up in renovation works due to opening up of metro, tier 1 towns along with synergies through acquisition of market leader Huntsman Advanced Materials Solutions Pvt Ltd (HAMSPL) in the epoxy adhesive segment would further help drive revenue growth, going forward. ➢ Hence, we hold positive view on the scrip and recommend BUY with a target price of Rs. 1920 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 57.5x on FY22E EPS.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 2318 PI Industries Ltd. Target: Rs. 2780 PI Industries 3Yr. Price Chart Company Overview 2600 BSE Code 523642 NSE Code PIIND 2100 Bloomberg Code PI IN ISIN INE603J01030 1600 Market Cap (Rs. Cr) 35176 Outstanding shares (Cr) 15.2 1100 52-wk Hi/Lo (Rs.) 2343.95 / 970.1 Avg. daily volume (1yr. on NSE) 222592 600

Face Value (Rs.) 1

Feb-18 Feb-19 Feb-20

Aug-18 Aug-19 Aug-20

Nov-17 Nov-18 Nov-19

May-19 May-20 Book Value (Rs) 330.5 May-18 ➢ PI Industries Ltd. (PI) reported a good Q2 numbers beating estimates. Revenue/EBITDA grew 28%/46% YoY. Domestic sales/exports rose 33%/25% YoY. Isagro led the strong domestic sales along with market share gains in Nominee Gold and Osheen brands. Growth in exports was driven by ramp-up of volumes for molecules commercialized over the last two years. EBITDA margin hit a historical high of 24% (+2ppt QoQ) led by gross margin expansion from a better CSM mix (69% vs. 58% of Q1 sales) and operating leverage. ➢ The CSM order book was steady at US$ 1.5bn, which represents TTM book to bill of more than 4x. PI expects good volume scale-up for products launched in the last 1-2 years and sees scope to grow >20% at least on current capacity in the next 4- 6 quarters. ➢ PI’s clients have indicated strong demand for their products as they increase their product registrations in more geographies. Management has guided for over 20% growth in the export segment for FY21 as 40+ products are in the R&D pipeline at different stages. ➢ Management retained FY21 guidance of 20%+ sales growth and maintain long-term margins of 23% on a sustainable basis.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢ The company recently mobilised Rs. 2000 crore through QIP. The same would likely be allocated towards pharma and CSM business vertical over the coming period. The management highlighted that the decision towards investment of these proceeds would likely to be taken in the coming four to six quarters. Management expects the new acquisitions to deliver higher ROCE than the current company average after one year of integration vs. earlier expectation of at par ROCE. It is expected that the pharma business to have a higher margins profile than the base business. Hence, this provides decent margin visibility in the medium term and, thereby, return ratios. ➢ In terms of the pharma portfolio, it continues to supply pharma intermediates on commercial scale with more than 10+ pharma products at various development stages in R&D. Along with this the cpmpany is also working on already commercialized molecules, where quality and technology would be a differentiator for PI. In terms of CSM, all MPPs are operational. One MPP under construction is expected to be commissioned next year. ➢ Capex for H1FY21 was down 52% YoY at Rs1.8bn vs. Rs3.5bn. Management has maintained its capex guidance of Rs5.5-6bn for FY21 with some spillover in FY22 due to Covid-19-led delay (Rs1-1.5bn). ➢ PI has filed 18 patents during H1FY21 (11 in Q2FY21), which includes intermediates for Covid-19. During the quarter, the company has launched two new products (Londax powder – Insecticide and Shield – Fungicide) which are used for rice crops. The company has also commercialized one new product in the CSM segment in H1FY21 with few more molecules lined up for H2FY21. PI plans to launch 2-3 new proprietary products for the domestic market every year. ➢ Going ahead, it is expected that H2 will see continued momentum led by anticipated good Rabi season, healthy export trend and Isagro’s integration benefits. However, PI has maintained its 20%+ growth guidance, despite higher 34% yoy growth in H1FY21, which is likely on a conservative side. ➢ Hence, we hold positive view on the scrip and recommend BUY with a target price of Rs. 2780 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 40.1x on FY22E EPS.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 11701 Bosch Ltd. Target: Rs. 14100

Bosch 3Yr. Price Chart Company Overview 24000 500530 BSE Code 22000 NSE Code BOSCHLTD 20000 Bloomberg Code BOS IN 18000 ISIN INE323A01026 16000 Market Cap (Rs. Cr) 34511 14000 Outstanding shares (Cr) 2.9 12000 52-wk Hi/Lo (Rs.) 17260.3 / 7850 10000 Avg. daily volume (1yr. on NSE) 42505 8000

Face Value (Rs.) 10

Feb-18 Feb-19 Feb-20

Aug-18 Aug-19 Aug-20

Nov-18 Nov-19

Book Value (Rs) 2989.5 Nov-17

May-18 May-19 May-20 ➢ Bosch Limited (Bosch), a leading technological player is set to gain from the implementation of Bharat Stage 6 (BS- VI) emission norms in India. India move directly from BS-IV norms to BS-VI norms in order to curb pollution. ➢ Bosch is going to see a significant increase in content per vehicle under the BS-VI regime as compared to the BS-IV era as the drastic reduction in particulate matter and nitrogen oxide emission makes changes in engine specifications and exhaust treatment imperative. ➢ Since 2017, Bosch has executed 79 BS6 projects in the PVs/CVs with major OEMs. Amid the crisis, in India, company plans to continue with critical investments in competence development and solutions designed/developed for India. ➢ With a strong technological parentage, Bosch has developed solutions for automotive OEM customers and has also forayed into new segments to meet stringent BS-VI norms.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢ Company has tied up with major OEMs for supplying them with BS-VI compliant components. ➢ Bosch is a technologically-focused company operating in an industry with high entry barriers and has maintained a strong, debt free balance sheet with robust return ratios. ➢ Bosch India is focusing on electric vehicles as it wants to be a tech-agnostic player and plans to provide services to the entire automotive technology chain. Bosch India has received orders for the electric vehicles and is currently supplying to both the two-wheeler and the passenger vehicle segment. Major OEMs venturing into the electric vehicle space have chosen Bosch India as vendor. ➢ Bosch has adopted a 2 prolonged approach, one is ‘fit for market’ products and solutions and on the other hand, it plans to increase ‘Go to Market’ footprint, using both offline and digital platforms. ➢ Bosch Q2FY21 revenue grew by 7% YoY on the back of pick up in OEM demand coupled with increased content per vehicle on account of BS6 emission norms. EBITDA margin declined as the company was unable to fully pass on cost increases due to BS6 norms, adverse foreign exchange movement. During the quarter, Bosch realized exceptional loss of Rs 400 crore towards restructuring and transformational projects which adversely affected the bottom-line of the company. ➢ The automotive industry witnessed sharp improvement in demand with production decline narrowing significantly to 5% y-o-y in Q2FY2021, as compared to steep double-digit drop in Q1FY2021. Bosch stated that with the onset of the festive season, order book is strong and the company expects double-digit growth in Q3FY2021. ➢ Bosch’s BS6 order book at Rs 18,500 crore executable over the next five to six years provides strong visibility for the company. Recovery is expected from FY22 driven by normalization in economic activity. ➢ Thus, we recommend our investors to BUY the scrip with target of Rs 14100 from 12 months investment perspective. At CMP, the scrip is valued at P/E multiple of 26x on FY22E Bloomberg consensus EPS of Rs 448.2.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 69999 MRF Ltd. Target: Rs. 81000

Company Overview MRF 3Yr. Price Chart 85000 BSE Code 500290 80000 NSE Code MRF 75000 Bloomberg Code MRF IN ISIN INE883A01011 70000 Market Cap (Rs. Cr) 29688 65000 Outstanding shares (Cr) 0.4 60000 52-wk Hi/Lo (Rs.) 73565.7 / 49915.1 55000 Avg. daily volume (1yr. on NSE) 13083 50000

Face Value (Rs.) 10

Feb-19 Feb-20

Book Value (Rs) 29653.9 Feb-18

Aug-18 Aug-19 Aug-20

Nov-17 Nov-18 Nov-19

May-18 May-19 May-20 ➢ MRF is the largest tyre manufacturers in India with installed capacity of nearly 11 lakh tonne per annum and hold dominant market share of 25% in Indian tyre market and derives around 70% of revenue from the replacement segment which should ensure revenue stability compared to its peers and enjoy above-industry margins.

➢ MRF has benefited most from government recent move of shifting tyre from free trade to restricted trade as most import happened in Truck and Bus and Passenger vehicle tyres and MRF derives nearly 50% and 21% revenue from MHCV and PV segment just after JK tyre which derive 61% and 24% revenue from MHCV and PV segment.

➢ MRF due to is superior product mix enjoy higher margins compared to its peers. MRF as of FY20 earned EBITDA/tonne of around Rs 30,000 which is highest in the Industry. The company has all the capability to sustain its market leadership position in the industry and enjoy healthy margins.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢ MRF has the largest network on pan India basis and are most penetrated across smaller cities and towns. MRF’s distribution network is wide spread as well as very efficient in quality terms. Company deep penetration into smaller towns is due to its no. 1 position in 2Ws and tractors.

➢ MRF follows a dealer stock re-filling model, hence, there is no sales push to dealers, which leads to stable pricing and better margin for dealers. MRF dealers are most profitable due to a better product mix with a decent share of consumer-facing 2W and Passenger vehicle tyres as these are bought for personal consumption, margins are better for dealers on these vs. commercial tyres.

➢ Over 70% of revenues for the Indian tyre industry are linked to the replacement market, where demand is largely insulated from COVID-19 headwinds.

➢ MRF reported strong Q2FY21 numbers on the back of robust demand particularly from replacement market with revenue growth of 5.9% YoY. EBITDA and Net profit grew at much faster pace by 55.8% and 79.5% YoY respectively. On the back of robust growth in profitability company announced a dividend of Rs 3 per share.

➢ Hence, we recommend our investors to BUY the scrip for a target of Rs. 81000 from 12 months investment perspective. Currently, the scrip is valued at P/E multiple of 22x on FY22E EPS.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com CMP: Rs. 9690 (India) Ltd. Target: Rs. 11500

Company Overview Dixon 3Yr. Price Chart 10500 BSE Code 540699 9500 NSE Code DIXON 8500 Bloomberg Code DIXON IN 7500 ISIN INE935N01012 6500 5500 Market Cap (Rs. Cr) 11212 4500 Outstanding shares (Cr) 1.2 3500 52-wk Hi/Lo (Rs.) 10599 / 2662.55 2500 Avg. daily volume (1yr. on NSE) 71192 1500

Face Value (Rs.) 10

Feb-18 Feb-19 Feb-20

Aug-18 Aug-20

Book Value (Rs) 509.2 Aug-19

Nov-17 Nov-18 Nov-19

May-18 May-19 May-20

➢ Dixon is the largest Electronic Services (EMS) player in India, with a diversified product portfolio across Consumer Electronics, Home Appliances, Lighting Solutions, Mobile Phones, Security Surveillance Systems and Reverse Logistics.

➢ Company caters to all the electronic leading players in respective segments, including Panasonic, KORYO, Samsung, SANYO, PHILIPS, , Crompton, USHA, SYSKA, GIONEE, KARBON, TAMBO, alcatel .

➢ Currently, Consumer electronics segment account largest revenue share of 48%, followed by lighting solutions 26%, Home appliances 9%, Mobile phones 12% and reverse logistic & security devices the rest 5.4%.

➢ With the government focus on indigenization and implementation of Production linked Incentive (PLI) on mobile phones and electronic components, the mobile phone segment revenue share is expected to touch 44% by FY23.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com ➢ The Indian Electronic Manufacturing System (EMS) market size was around USD 6 billion in FY20 and is expected to reach USD 40 billion by the year 2025, registering a significant CAGR of 47% over 2020-25. Rising manufacturing costs in other countries, tendency of bigger OEMs to outsource manufacturing instead of building their own infrastructure and growth in end-user segments consumer electronics, home appliances, mobile phones and LED lighting products are the primary growth drivers for the industry.

➢ Dixon as domestic manufacturers has made 2 PLI applications under the category in which phones costing above Rs 15,000 and that accounts nearly 70% of Indian mobile market. Out of 2 applications, Dixon’s wholly owned subsidiary, Padget Electronics has won the approval.

➢ Dixon manufacturers nearly 11 million units and after the expansion in PLI scheme the total production will reach to 27 million units in next 4-5 years resulting in turnover of in between Rs 25,000-30,000 crore over the next 5 years.

➢ Dixon reported robust Q2FY21 numbers on the back of steady utilization across its business verticals. Revenue during the quarter grew by 16.9% YoY, while EBITDA grew by whooping 41.8% YoY and net profit grew by 21.6% YoY.

➢ In past 3 years, its revenue grew at a CAGR of 24% during FY18-FY20, while net profitability grew at much faster pace at 41% during same period. Healthy cash flows ensure continuous capacity expansion without leveraging the balance sheet.

➢ Thus, we recommend our investors to BUY the scrip with target of Rs 11,500 from 12 months investment perspective. At CMP, the scrip is valued at P/E multiple of 46x on FY22E Bloomberg consensus EPS of Rs 216.7.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com Disclosure & Disclaimer

Ashika Stock Broking Limited (“ASBL”) started its journey in the year 1994 and is presently offering a wide bouquet of services to its valued clients including broking services, depository services and distributorship of financial products (Mutual funds, IPO & Bonds). It became a “Research Entity” under SEBI (Research Analyst) Regulations 2014 in the year of 2015 (Reg No. INH000000206). ASBL is a wholly owned subsidiary of Ashika Global Securities (P) Ltd., a RBI registered non-deposit taking NBFC Company. ASHIKA GROUP (details enumerated on our website www.ashikagroup.com) is an integrated financial service provider inter alia engaged in the business of Investment Banking, Corporate Lending, Commodity Broking, Debt Syndication & Other Advisory Services. There were no significant and material disciplinary actions against ASBL taken by any regulatory authority during last three years except routine matters. Disclosure Research reports are being prepared and distributed by ASBL in the sole capacity of being a Research Analyst under SEBI (Research Analyst) Regulations 2014. The following disclosures and disclaimer are an essential part of any Research Report so being distributed.

• ASBL or its associates, its Research Analysts (including their relatives) may have financial interest in the subject company(ies). And, the said financial interest is not limited to having an open stock market position in /acting as advisor to /having a loan transaction with the subject company(ies) apart from registration as clients. • ASBL or its Research Analysts (including their relatives) do not have any actual / beneficial ownership of 1% or more of securities of the subject company(ies) at the end of the month immediately preceding the date of publication of the source research report or date of the concerned public appearance. However, ASBL's associates may have actual / beneficial ownership of 1% or more of securities of the subject company(ies). • ASBL or its Research Analysts (including their relatives) do not have any other material conflict of interest at the time of publication of the source research report or date of the concerned public appearance. However, ASBL's associates might have an actual / potential conflict of interest (other than ownership). • ASBL or its associates may have received compensation for investment banking, merchant banking, brokerage services and for other products and services from the subject companies during the preceding 12 months. However, ASBL or its associates or its Research analysts (forming part of Research Desk) have not received any compensation or other benefits from the subject companies or third parties in connection with the research report/ research recommendation. Moreover, Research Analysts have not received any compensation from the companies mentioned in the research report/ recommendation in the past twelve months. • The subject companies in the research report/ recommendation may be a client of or may have been a client of ASBL during the twelve months preceding the date of concerned public appearance for investment banking/ merchant banking / brokerage services. • ASBL or their Research Analysts have not managed or co–managed public offering of securities for the subject company(ies) in the past twelve months. However, ASBL's associates may have managed or co–managed public offering of securities for the subject company(ies) in the past twelve months. • Research Analysts have not served as an officer, director or employee of the companies mentioned in the report/ recommendation. • Neither ASBL nor its Research Analysts have been engaged in market making activity for the companies mentioned in the report / recommendation. Disclaimer The research recommendations and information are solely for the personal information of the authorized recipient and does not construe to be an offer document or any investment, legal or taxation advice or solicitation of any action based upon it. This report is not for public distribution or use by any person or entity, where such distribution, publication, availability or use would be contrary to law, regulation or subject to any registration or licensing requirement. We will not treat recipients as customer by virtue of their receiving this report. The report is based upon the information obtained from public sources that we consider reliable, but we do not guarantee its accuracy or completeness. ASBL shall not be in anyways responsible for any loss or damage that may arise to any such person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022- 6611 1700 www.ashikagroup.com