Dixon Technologies () Ltd. Q3FY21 - Results Update Sector:

04-February-2021 Brief Overview Dixon posted strong Q3FY21 results led by LED TV, Mobiles and Washing Machines. Margins down slightly by 60bps YoY at 4.6%, due to increase in RM cost; Order book CMP (INR) (As on 03-Feb-2021) 15,879 continues to Remain Strong; FY22E margins expected at ~4.6%; Expecting PLI scheme Previous Target (INR) 13,053 in LED lighting & IT Hardware soon; FTL WM production to start from early Q1FY22E. Current Target 16,119 Q3FY21 Consolidated Earnings Analysis Upside(%) ~1.5% Q3FY21 revenue jumped 120% YoY at Rs 21,828 million, mainly led by strong revenue Recommendation HOLD growth in LED TVs, Mobiles and Washing Machine segment. The consumer durables attracted strong demand due to festive season buying and improved consumer BSE Code 540699 sentiments on reduction in Covid cases. EBITDA rose 95% YoY at Rs 1,005 million. However, margins were down slightly by 60bps at 4.6% vs 5.2% YoY. Fall in the margins NSE Code DIXON was largely contributed by WM segment, which saw decline in margins at 10.2% vs Reuters Ticker DIXO.NS 13.4% YoY. The raw material cost, as % of revenue during the quarter stood higher at 90.4% vs 87.2% YoY . PBT increased 130% YoY at Rs 817 million, as depreciation (0.5% Bloomberg Ticker DIXON:IN vs 1% YoY) and Interest cost (0.4% vs 0.8% YoY) share as % of total revenue declined. Consolidated PAT was up 134% YoY at Rs 616 million. PAT margins improved to 2.8% vs StockStock ScanScan 2.6% YoY. Market cap (INR Mn) 1,85,905 Segment performance Consumer Electronics: Revenue jumped 199% YoY at Rs 13,598 million, led by both Outstanding Shares (Mn) 11.7 volume and price increase. Revenue mix increased to 62% from 46% YoY. EBITDA was Face Value (INR) 10.0 up 243% YoY at Rs 394 million. Margins were higher at 2.9% vs 2.5% YoY on operating leverage and increased share of 43+ inches LED TVs from 32 inches. Dividend Yield(%) 0.04% Lighting Products: Revenue up 26% YoY at Rs 3,486 million. EBITDA increased 39% P/E (x) (TTM) 129.9X YoY at Rs 332 million, as margins rose 90bps YoY at 9.5% on better product mix. P/B (x) (TTM) 28.0X Mobile & EMS: Revenue jumped 114% YoY at Rs 2991.7 million. EBITDA was up 328% YoY at 32.2 million, as margins doubled from 2.3% to 4.6%. Debt/Equity (x) 0.15x Home Appliances: Segment revenue stood higher 68% YoY at Rs 1152 million. Beta vs. Nifty 0.75x Q3FY21. However, EBITDA grew 28% YoY at Rs 118 million, as margins fell to 10.2% vs 52 Week High/ Low (INR) 16,786/ 2991 13.4% YoY, due to increase in raw material prices and freight cost. Margins to remain suppressed in Q4FY21 also, and expected to normalize from Q1FY22. Avg. Daily Volume (NSE)/ 1Yr 68,595 Valuation & Outlook Shareholding Pattern (%) We believe that Dixon’s strong performance to continue over FY22-FY23E on the back of robust order book, new client additions, product launches, capacity expansion in key Dec 2019 Sep 2020 Dec 2020 segments and substantial increase in mobile revenue. Promoters 37.92% 36.01% 35.06% Post Q3FY21 results, we have increased our price target at Rs 16,119, valuing the stock Institutions 31.58% 33.76% 35.54% at PE of 42x FY23E EPS of Rs 383.8. We maintain our “HOLD” rating on the stock. Non-Institution 35.50% 30.23% 29.40% Exhibit 2 - Financial Performance at a glance (Consolidated) INR Million Exhibit 1– Dixon vs. Nifty (Relative Returns) Particulars (In Rs Mn) FY19 FY20 FY21E FY22E FY23E Net Sales 29,844 44,001 65,260 1,06,285 1,43,057 350 Dixon Nifty50 Growth % 5.0% 47.4% 48.3% 62.9% 34.6% 300 EBITDA 1,349 2,231 3,096 4,850 6,727 250 EBITDA Margin (%) 4.5% 5.1% 4.7% 4.6% 4.7% 200 Net Profit 634 1,205 1,838 3,089 4,493 150 Net Profit Margin (%) 2.1% 2.7% 2.8% 2.9% 3.1% 100 50 EPS (In Rs) 55.9 104.1 157.0 263.8 383.8 0 BVPS (In Rs) 334 468 629 869 1,216 Feb-20 May-20 Aug-20 Nov-20 Jan-21 P / E (x) 283.8x 152.5x 101.2x 60.2x 41.4x P / BV (x) 47.5x 33.9x 25.2x 18.3x 13.1x Research Analyst ROE (%) 18.3% 26.2% 28.8% 35.2% 36.8% Rahul Sony ROCE (%) 27.3% 33.7% 38.0% 46.0% 48.9% Email: [email protected] Source: Company Data, SMIFS Research SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 1

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Exhibit 3: Financial Performance (Consolidated) INR Million Particulars Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 YoY% QoQ% 9MFY20 9MFY21 YoY% Net Revenue 11469 14020 9938 8574 5169 16387 21828 120% 33% 35427 43385 22% Cost of goods sold 10162 12553 8666 7222 4550 14447 19740 128% 37% 31380 38737 23% % of Revenue 88.6% 89.5% 87.2% 84.2% 88.0% 88.2% 90.4% 324bps 228bps 88.6% 89.3% 71bps SG&A expenses 781 837 757 793 451 1046 1083 43% 3% 2375 2580 9% % of Revenue 6.8% 6.0% 7.6% 9.3% 8.7% 6.4% 5.0% -266bps -142bps 6.7% 5.9% -76bps EBITDA 526 631 515 559 169 894 1005 95% 12% 1672 2068 24% EBITDA margin% 4.6% 4.5% 5.2% 6.5% 3.3% 5.5% 4.6% -58bps -85bps 4.7% 4.8% 5bps Depreciation 76 82 98 109 93 109 113 14% 3% 256 314 23% Interest 99 94 81 77 57 69 77 -4% 12% 273 203 -26% EBT 351 455 336 373 20 716 815 142% 14% 1143 1551 36% Other Income 6 28 18 0 2 3 1 -92% -44% 52 6 -89% PBT 357 483 355 373 22 718 817 130% 14% 1195 1557 30% Provision for tax 121 53 92 97 6 195 201 119% 3% 266 401 51% % Tax rate 33.9% 11.0% 25.8% 26.0% 25.9% 27.1% 24.6% -124bps -249bps 22.2% 25.8% 352bps Consolidated Net Profit 236 430 263 276 16 524 616 134% 18% 929 1156 24% Net profit margin% 2.1% 3.1% 2.6% 3.2% 0.3% 3.2% 2.8% 18bps -37bps 2.6% 2.7% 4bps EPS (In Rs) 20.1 36.8 22.5 23.6 1.4 44.7 52.6 134% 18% 79.4 98.7 24%

Segment Results Revenue Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 YoY% QoQ% 9MFY20 9MFY21 YoY% Consumer Electronics 5098 7382 4543 3930 3473 9569 13598 199% 42% 17022 26640 57% Lighting Solutions 3243 2839 2767 2548 777 2957 3486 26% 18% 8849 7220 -18% Home Appliances 988 1391 684 900 241 1454 1152 68% -21% 3063 2847 -7% Mobile & EMS 1437 1934 1395 603 531 1974 2992 114% 52% 4766 5499 15% Security Devices (50%) 679 435 503 546 134 397 555 10% 40% 1618 1084 -33% Reverse Logistics 24 38 46 47 14 36 45 -3% 23% 109 95 -13% 11469 14020 9938 8574 5170 16387 21828 120% 33% 35427 43385 22%

Revenue Mix (%) Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 YoY% QoQ% 9MFY20 9MFY21 YoY% Consumer Electronics 44% 53% 46% 46% 67% 58% 62% - - 48% 61% - Lighting Solutions 28% 20% 28% 30% 15% 18% 16% - - 25% 17% - Home Appliances 9% 10% 7% 10% 5% 9% 5% - - 9% 7% - Mobile & EMS 13% 14% 14% 7% 10% 12% 14% - - 13% 13% - Security Devices (50%) 6% 3% 5% 6% 3% 2% 3% - - 5% 2% - Reverse Logistics 0.2% 0.3% 0.5% 0.5% 0.3% 0.2% 0.2% - - 0% 0% -

EBITDA Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 YoY% QoQ% 9MFY20 9MFY21 YoY% Consumer Electronics 114 177 115 98 86 265 394 243% 49% 406 746 84% Lighting Solutions 254 230 239 254 58 277 332 39% 20% 722 666 -8% Home Appliances 107 164 92 99 4 173 118 28% -32% 363 295 -19% Mobile & EMS 32 41 32 85 20 163 138 328% -15% 106 322 205% Security Devices (50%) 20 11 22 19 0 12 20 -13% 67% 53 30 -44% Reverse Logistics -1 7 16 4 0 4 5 -71% 24% 22 9 -60% 526 631 515 559 169 894 1005 95% 12% 1672 2068 24%

EBITDA margin Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 YoY% QoQ% 9MFY20 9MFY21 YoY% Consumer Electronics 2.2% 2.4% 2.5% 2.5% 2.5% 2.8% 2.9% - - 2.4% 2.8% - Lighting Solutions 7.8% 8.1% 8.6% 10.0% 7.4% 9.4% 9.5% - - 8.2% 9.2% - Home Appliances 10.8% 11.8% 13.4% 11.0% 1.7% 11.9% 10.2% - - 11.8% 10.4% - Mobile & EMS 2.2% 2.1% 2.3% 14.1% 3.8% 8.2% 4.6% - - 2.2% 5.9% - Security Devices (50%) 3.0% 2.4% 4.4% 3.5% 0.1% 2.9% 3.5% - - 3.3% 2.8% - Reverse Logistics -4.6% 18.8% 34.4% 9.2% 2.9% 10.2% 10.3% - - 20.2% 9.3% - 4.6% 4.5% 5.2% 6.5% 3.3% 5.5% 4.6% - - 4.7% 4.8% -

ODM Revenue Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 YoY% QoQ% 9MFY20 9MFY21 YoY% Consumer Electronics 8.0% 4.0% 3.0% 2.0% 3.0% 3.0% 6.0% - - 6.0% 5.0% - Lighting Solutions 83.0% 84.0% 89.0% 94.0% 90.0% 90.0% 91.0% - - 85.0% 90.0% - Home Appliances 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% - - 100.0% 100.0% - Source: Company Data, SMIFS Research SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 2

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Segment Update Consumer Electronics (LED TV) Revenue jumped 199% YoY at Rs 13,598.3 million, led by both volume and price increase. Revenue share increased to 62% during Q3FY21 from 46% YoY. ODM revenue share was higher at 6% vs 3% YoY. EBITDA was up 243% YoY at Rs 394.3 million. Margins for the segment were higher at 2.9% vs 2.5% YoY on operating leverage and better product mix. Market is shifting from 32 inches to 43+ inches TV, where the realizations, and margins are higher. The unit realizations have increased from Rs 9-10k to 14-15k in last two quarters. Company to increase the capacity from 4.4 mn to 5.5 million by Q2FY22, which is ~40% of total domestic demand. PCBA line increased from 1 mn to 1.8 mn already and further to be increased to 2.8 mn by Q2FY22. Dixon’s anchor customer, and ’s revenue contribution has come down to ~75% from ~85% last year. Dixon is expecting to add more customers in coming quarters, and with that Xiaomi and Samsung’s contribution is expected to come down to ~65%. Samsung has given orders for 5 lac TVs in FY21; For FY22, orders expected to increase to ~7 lacs. Dixon is expecting addition of a large client shortly on ODM basis, which will increase the ODM revenue share from ~6% to 15-20%. Despite the global shortage of open cells and displays for LED TVs, Dixon is unlikely to face any supply related constraints as Samsung & Xiaomi are big brands capable of handling supply related issues. The supply related issues for glass for manufacturing open cell to reduce by Q2FY22. FY22E looks very good in terms of demand.

Lighting Products Revenue increased 26% YoY at Rs 3486 million; Revenue mix at 16%. ODM revenue share was higher at 91% vs 89% YoY. EBITDA increased 39% YoY at Rs 332 million, as margins increased 90bps YoY at 9.5% on better product mix. LED Bulbs capacity at 300 mn, which is ~45% of the total domestic requirement. Battens capacity at 24 mn current, to be expanded to 36 mn in Phase-I and then to 48 mn in Phase-II. Downlighters capacity has been expanded form 7.2 mn to 14.4 mn. Order book is strong. Dixon to set up a new facility in Uttarakhand, expected to start by Q3FY22 end. As PLI in lighting expected by Feb-21 end, Dixon will align the new facility under the lighting PLI. Company catering to almost all the brands in lighting segment. Company already exporting LED bulbs to US and Indonesia. It is in discussion with large international retail clients for LED bulb exports. Globally, LED lighting is a huge opportunity at $8 billion. Dixon is currently no. 3 player globally. Completed automation of 1/3 of LED bulbs capacity, which will reduce the manufacturing cost. To launch LED streets lights in Q2FY22. ODM share to increase to 95% in future.

SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 3

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Segment Update Home Appliances (Washing Machine) Segment revenue stood higher 68% YoY at Rs 1152 million. Revenue share stood at 5% during Q3FY21. EBITDA rose 28% YoY at Rs 118 million; Margins declined 10.2% vs 13.4% YoY due to increase in raw material prices and freight cost. Q4FY21 margins are also expected to be down YoY, only to normalize from Q1FY22. Dixon has 170 models in WM (Washing Machines), in the range of 6-11.5 Kgs. Order book continues to remain strong. To cater growing demand, company to expand Semi automatic WM from 1.2 mn to 1.6 mn in a new site in Dehradun. With that the company will have a foot print in both South and North India. The new unit for manufacturing Fully Automatic WM with capacity of 0.6 mn is almost complete. It has already made tie-up with a large MNC brand for this. With the new plant, combined WM capacity would be 2.2 mn, which will be ~30% of the overall market size of 7-7.5 mn. To enter refrigerator manufacturing in FY23.

Mobile & EMS Revenue jumped 114% YoY at Rs 2991.7 million. EBITDA was up 328% YoY at 32.2 million, as margins doubled from 2.3% to 4.6%. Company has capacity to manufacture 27.6 mn 2G phones. To expand capacity to be over 20 mn in next 2 years. Heavy order book from anchor customer for 2G phones. FY21 volume 2.9 mn sets, vs 2.1 mn in FY21. 20- 25% year growth. New factory for production under PLI is ready. The Commercial production for has already started. Production for to start from early March. Most of the manufacturing will be to meet exports. Company also in discussion with other large mobile brands and may add in future. In next 3 years, ~15-20% of Motorola’s total global supply (~40 mn) to be with Dixon. Motorola has manufacturing plant in China and Brazil. Dixon believes that Motorola’s China business will shift to the company. To explore backward integration with manufacturing of chargers, battery and mechanicals. However, not looking into PCB manufacturing. Industry body has requested to government for extension of PLI target timelines due to acute shortage of displays and micro processors. Next year threshold is Rs 1000 crore. Company confident to meet the same. Under PLI scheme, company expect to do revenue of Rs 250-280 billion over next 5 years, with EBITDA margins of ~3%. As the supply chain & sourcing (including for microchips) to be done by OEM clients like Motorola & Nokia, Dixon is unlikely to face any issues, despite the global shortage of mico-processors. To stand on own feet in next 3-4 years with backward integration and foray in ODM for basic 4G phones.

STB Manufactured ~9 lac units of STBs for Jio, Dish TV and Citi cable in Q3FY21. Healthy order book of 3-4 lac per month for forthcoming quarters Done a volume of 450 units of RTPCR medical devices valued at Rs 110 million, 28% operating margins. Jio is a large customer for STB. STB is a Rs 3500-4000 million business opportunity for Dixon.

SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 4

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Segment Update

Security Healthy order book. Expanding further capacity.

Reverse Logistics The revenue mainly came from STB and LED TV panel repair business. Company is opening a new center in Tirupati for reverse logistics.

Wearables Wearables market size is ~Rs 5000 crore, and is growing fast. Recently announced tie-up with ‘Boat’, and received initial order for 10,000 units, of which manufacturing to start from Feb-21. Dixon sees Boat as a strong partner in this segment for long term growth opportunities.

Others Dixon has already done Rs 1040 million capex in the FTL and mobile PLI during the 9MFY21 and is expected to end FY21 with total capex of Rs 1450-1550 million. FY22E capex expected to be in the same range. Gross debt stood at Rs 1510 million as on Q3FY21 end, while net debt was negative at Rs 540 million.

Exhibit 4 - Capital Employed (In Rs Mn)

Source: Company Data, SMIFS Research

SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 5

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Key Performance Indicators Exhibit 5: Revenue and EBITDA Trend (In Rs Mn) Exhibit 6: Net Profit and margin trend (In Rs Mn) 6.5% 3.2% 4% 7% 3.1% 3.2% 20000 600 2.8% 5.5% 6% 3% 5.2% 2.6% 500 16000 4.6% 4.5% 4.6% 5% 3% 2.1% 400 12000 3.3% 4% 2% 21828 616 3% 300 2% 8000 16387 524 14020 200 430 11469 2% 1% 9938 276 4000 8574 236 263 0.3% 5169 1% 100 1% 526 631 515 559 169 894 1005 16 0 0% 0 0% Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Net Revenue EBITDA EBITDA margin% Consolidated Net Profit Net profit margin% Source: Company Data, SMIFS Research Source: Company Data, SMIFS Research

Exhibit 7: Segment Revenue Mix (%) Exhibit 8: ODM Revenue share trend (%)

100% 6% 3% 5% 6% 3% 2% 3% 120.0% 10% 12% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 13% 14% 14% 7% 14% 5% 100.0% 80% 10% 10% 9% 5% 9% 7% 15% 18% 16% 80.0% 94.0% 91.0% 20% 89.0% 90.0% 90.0% 60% 28% 28% 30% 83.0% 84.0% 60.0% 40% 67% 62% 40.0% 53% 58% 20% 44% 46% 46% 20.0% 8.0% 4.0% 3.0% 2.0% 3.0% 3.0% 6.0% 0% 0.0% Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Reverse Logistics Security Devices (50%) Mobile & EMS Consumer Electronics Lighting Solutions Home Appliances Home Appliances Lighting Solutions Consumer Electronics Source: Company Data, SMIFS Research Source: Company Data, SMIFS Research

Exhibit 9: ROE, ROCE and ROA Trend Exhibit 10: D/E Ratio (%) 60% 0.25x 49% 46% 50% 0.15x 38% 0.17x 40% 34% 0.11x 0.08x 0.09x 30% 35% 37% 29% 0.01x 0.01x 20% 26% 12% 13% 0.01x 8% 10% 10% FY20 FY21E FY22E FY23E -0.07x -0.03x -0.02x 0% -0.08x FY20 FY21E FY22E FY23E -0.15x Debt/Equity Net Debt/Equity ROE ROCE ROA

Source: Company presentation, SMIFS Research Source: Company presentation, SMIFS Research

SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 6

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Valuation & Outlook Exhibit 11 - Change in Estimates FY21E FY22E FY23E Particulars Revised Old Change Revised Old Change Revised Old Change Net Revenue 65260 52761 23.7% 106285 87520 21.4% 143057 115334 24.0% EBITDA 3096 2585 19.8% 4850 4201 15.5% 6727 5767 16.6% EBITDA margin (%) 4.7% 4.9% -16bps 4.6% 4.8% -24bps 4.7% 5.0% -30bps PAT 1838 1453 26.5% 3089 2599 18.8% 4493 3776 19.0% PAT margin (%) 2.8% 2.8% 6bps 2.9% 3.0% -6bps 3.1% 3.3% -13bps

Dixon Technologies (India) Ltd is a leader in EMS OEM/ODM space in India, with its presence in various sub-segment of electronics manufacturing, like Consumer Electronics, Lighting, Home Appliances, Mobile phones, Security devices and Reverse Logistics. Dixon occupies a dominant position in some of its segment with largest domestic capacities spread across its state of art 10 manufacturing units in India, catering to several MNCs and leading domestic brands like Samsung, , Xiaomi, , etc. Healthy relationship with its clients, backward integration of key segments and cost-effective pricing strategy on the back of global sourcing are some of key competitive advantage of Dixon.

Dixon has posted strong Q3FY21 results in a challenging environment, led by significant jump in revenues from LED TV, Mobiles and Washing Machines segment. The other segment like Lighting Solutions and Security Devices have done fairly well. The overall Consumer durables sector has attracted strong demand in Q3FY21 due to festive season buying and improved consumer sentiments on reduction in Covid cases.

Announcement on PLI scheme in LED lighting and IT Hardware is expected in near future. At the same time, company facing headwinds in terms of commodity prices increase and shortage of key components which might impact ODM margins in near to medium term. However, Dixon is trying to mitigate the same with price increase and better inventory planning. Dixon is continuously acquiring new customers and deepening relation with existing clients. Dixon to continue to invest in hiring talents and in R&D.

We expect, Dixon’s overall Revenue, EBITDA and PAT to grow at a CAGR of ~48%, ~44% and ~55% over FY20-23E at Rs 143.1 billion, Rs 6727 million and Rs 4480 million, respectively.

EBITDA margins are expected to decline ahead because of an expected increase in share of revenue from LED TV and Mobile segment, which have low margin of ~3%. The EBITDA margins for FY22E and FY23E is now expected to be ~4.7% against 5.1% reported in FY20. The ROE and ROCE are further expected to expand from ~26.2% and 33.7% reported in FY20 to ~37% and ~49%, respectively by FY23E.

We believe that Dixon’s strong performance to continue over FY22-FY23E on the back of robust order book, new client additions, new product launches, capacity expansion across key segments, backward integration in key segments and substantial increase in mobile revenue due to PLI scheme.

Post Q3FY21 earnings, we have revised our earning estimates for Dixon. Accordingly, we have increased our price target at Rs 16,119, valuing the stock at PE of 42x on its FY23E EPS of Rs 383.8. We maintain our “HOLD” recommendation on the stock.

SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 7

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Risk & Concerns High dependency on certain key customers The business model of Dixon Technologies is such that it is highly dependent on certain key customers for a significant portion of its revenues. In the event of loss of relationship with any of these customers might have an adverse impact on the profitability.

No firm and long-term bulk purchase commitments Dixon don't obtain firm and long-term bulk purchase commitments from its customers. If a customers choose not to renew the existing agreements or stop to place orders, company’s business will be adversely affected.

Shortages / rises in raw materials prices may adversely affect the business Dixon’s production depends on obtaining adequate supplies of raw materials/ components on a timely basis. There may be delay in receiving the required raw materials/ components. Such an event may hamper company’s planning production and delay order execution, eventually affecting the business performance.

Company Description Dixon Technologies (India) Ltd is a leader in EMS (Electronic Manufacturing Services) OEM/ODM space in India. Since commencement of colour TVs in 1994, Dixon has expanded its operations to various sub-segments of electronics over the years.

Dixon provides design focused solutions in a) Consumer Electronics, b) Lighting, c) Home Appliances, d) Mobile phones, e) Security devices and f) Reverse Logistics to customers across the globe. Dixon’s clientele includes leading global and domestic brands.

Dixon has 10 state-of-the-art manufacturing facilities located in Uttar Pradesh, Uttarakhand and Andhra Pradesh and 3 R&D centre in India and China.

Healthy relationship with its clients, backward integration of key segments and cost- effective pricing strategy on the back of global sourcing are some of key competitive advantage of Dixon which positions it well against peers.

Please find below the link of our previous report:

Date: 15th December 2020 CMP: INR12,901 Target Price: INR13,053 Stewart & Mackertich Research– Initiating Coverage Report

SMIFS Limited Page No 5F, Vaibhav, 4 Lee Road, Kolkata – 700020, India 8

Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Financial Details Income Statement (Consolidated) In Rs Mn Particulars (Y/E March) FY19 FY20 FY21E FY22E FY23E Net Revenue 29844 44001 65260 106285 143057 COGS 26093 38602 57167 93318 125604 Gross Profit 3752 5399 8092 12967 17453 SG&A 2403 3168 4996 8116 10726 EBITDA 1349 2231 3096 4850 6727 Depreciation & Amortisation 217 365 468 578 689 Other Income 56 52 112 128 143 EBIT 1188 1917 2740 4400 6181 Interest Cost 250 350 290 297 208 PBT 938 1568 2450 4103 5973 Tax Expenses 305 363 613 1026 1493 PAT 634 1205 1838 3077 4480

Balance Sheet (Consolidated) In Rs Mn Particulars (Y/E March) FY19 FY20 FY21E FY22E FY23E Share Capital 113 116 117 117 117 Reserves & Surplus 3669 5298 7247 10054 14124 Networth 3782 5413 7364 10171 14241 Total Borrowings 1361 828 828 828 110 Net deferred tax liability 144 148 148 148 148 Other non-current liabilities 1630 959 990 1065 1123 Trade payables 7397 9391 10641 16721 24325 Other Current Liabilities 594 231 742 1001 1374 Total Equity & Liabilities 14908 16970 20714 29933 41321 Net Block+CWIP 2550 3209 4187 5151 6005 Intangible assets 47 1027 967 907 846 Other non-current assets 1618 271 381 593 834 Inventories 4084 4978 5441 8599 12582 Trade Receivables 5167 5151 6744 10589 15391 Cash and Cash Equivalents 367 1002 1001 766 1296 Other Current assets 1076 1331 1991 3328 4368 Total Current Assets 10694 12462 15178 23282 33636 Total Assets 14908 16970 20714 29933 41321 Source: Company Data, SMIFS Research

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Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Financial Details Cash Flow Statement (Consolidated) In Rs Mn Particulars (Y/E March) FY19 FY20 FY21E FY22E FY23E PBT 938 1568 2450 4119 5991 Depreciation & Amortisation 217 365 468 578 689 Interest & dividend Income -22 -27 -62 -62 -51 Interest expense 250 350 290 297 208 Changes in working capital -1275 423 -1033 -2139 -2029 Taxes Paid -183 -429 -613 -1030 -1498 Others 44 124 0 0 0 Cash Flow from Operating Activities -31 2373 1500 1764 3310 Capital Expenditure -790 -1081 -1386 -1482 -1482 Other Investments 130 60 0 0 0 Interest & Dividend Received 22 27 62 62 51 Cash Flow from Investing Activities -638 -993 -1324 -1420 -1431 Net issuance of equity 0 457 255 0 0 Net borrowings 964 -570 0 0 -718 Dividend paid (including tax) -27 -83 -141 -282 -423 Interest expense -251 -377 -290 -297 -208 Others Cash Flow from Financing Activities 686 -574 -177 -579 -1349 Net change in cash 18 807 -1 -235 530 Opening cash balance 127 144 957 956 721 Cash of acquired subsidiary 0 6 0 0 0 Closing Cash Balance 144 957 956 721 1251 Source: Company Data, SMIFS Research

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Dixon Technologies (India) Ltd. Q3FY21 - Results Update Sector: Consumer Electronics

Financial Details Key Ratios (Consolidated) Particulars (Y/E March) FY19 FY20 FY21E FY22E FY23E Growth (%) Net Revenue 5% 47% 48% 63% 35% Gross Profit 13% 44% 50% 60% 35% EBITDA 20% 65% 39% 57% 39% PAT 4% 90% 53% 68% 45% Margins (%) Gross Margin 12.6% 12.3% 12.4% 12.2% 12.2% EBITDA Margin 4.5% 5.1% 4.7% 4.6% 4.7% PBT Margin 3.1% 3.6% 3.8% 3.9% 4.2% PAT Margin 2.1% 2.7% 2.8% 2.9% 3.1% Per Share Data (In Rs) EPS 55.9 104.1 157.0 263.8 383.8 BVPS 334.0 467.9 629.0 868.8 1,216.4 CFS -2.7 205.1 128.1 150.6 282.7 DPS 2.0 6.0 10.0 20.0 30.0 No. of Shares 11.3 11.6 11.7 11.7 11.7 Profitability Ratios (%) RoE 18.3% 26.2% 28.8% 35.2% 36.8% RoCE 27.3% 33.7% 38.0% 46.0% 48.9% RoA 5.2% 7.6% 9.8% 12.2% 12.6% Valuation Ratios (x) P/E 283.8 152.5 101.2 60.2 41.4 P/BV 47.5 33.9 25.2 18.3 13.1 EV/ EBITDA 138.6 83.3 60.0 38.3 27.5 P/CFS -5870.0 77.4 123.9 105.4 56.2 Turnover Ratios (x) Inventory Turnover 7.1 8.5 8.8 8.8 8.7 Debtors Turnover 7.3 8.5 8.1 8.1 8.1 Creditors Turnover 4.2 4.6 4.5 4.5 4.5 Working Capital Turnover 18.6 18.2 18.6 19.3 15.8 Asset Turnover 2.4 2.8 3.5 4.2 4.0 Fixed Asset Turnover 14.4 16.1 17.9 22.8 25.6

Source: Company Data, SMIFS Research

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