Dixon Technologies Limited Q4FY21 Result Analysis

Dixon Technologies Limited recently published its Q4FY21 Results on 28 May 2021, the company posted a net profit of Rs. 44.3 Cr. this quarter. Let’s find out its other parameters through our analysis:

Introduction

Dixon Technologies was founded in 1993. Home-grown design-focused and Solutions Company engaged in manufacturing products in the consumer durables lighting and mobile phones markets in India. Its diversified product portfolio includes (i) consumer electronics like LED TVs; (ii) home appliances like washing machines; (iii) lighting products like LED bulbs and tube lights, downlighters, and CFL bulbs; (iv) mobile phones and (v) CCTV & Digital Video Recorders (DVRs).

We have done a 6 point analysis on the Q4FY21 Results of Dixon Technologies Limitedhttps://investyadnya.in/stock-articles/dixon-technologies-stock-update, namely:

Dixon Technologies Limited Result- 6 point analysis

1.Dixon Technologies - Q4FY21 Results:

• The Revenue from Operations has shown significant growth of 146.2% (YoY) to Rs. 2,210 Cr. in the Q4 of FY21 as compared to Q4 of the previous year. Whereas, the revenues have fallen by (3.3%) QoQ from Rs. 2,183 Cr.
• The Operating Profit of Dixon Technologies has delivered a steep growth of 42.8% (YoY) from Rs. 56 Cr. In Q4 FY20 to Rs. 80 Cr. in the Q4 of FY21. The profits have shown a fall in QoQ with a negative 20 % from Rs. 100 Cr. in Q3 FY21.
• The Operating Profit Margins (OPM) % have shown a fall due to a Rise in Input Prices by 270 basis points (bps) YoY from 6.5% in Q4 FY20 to 3.8% in Q4 of FY21. And on a QoQ basis, the OPM % has fallen by 80 basis points (bps) from 4.6% in Q3 FY21.
• Dixon Technologies has delivered a rise in Profit before Tax (PBT) of 64.6% YoY, from Rs. 37.3 Cr. in the Q4 of FY20 to Rs. 61.4 Cr. in the Q4 of FY21. Whereas, the QoQ showed a fall in profits by 24.7% from Rs. 81.6 Cr. in Q3 FY21.
• The profit after tax (PAT) has shown a massive growth of 60.5% (YoY) from Rs. 27.6 Cr. in the Q4 of FY20 to Rs. 44.3 Cr. in the Q4 of FY21. Net Profit on a QoQ basis has shown a fall of 28% from Rs. 61.6 Cr. in Q3 FY21.
• The Net Profit Margins (%) has also fallen by 110 bps (YoY) from 3.2% in Q4 FY20 to 2.1% in Q4 of FY21. And on a QoQ basis, the OPM % has decreased by 70 basis points (bps) from 2.8% Q3 FY21.

Dixon Technologies- Q4FY21 Results

2.Dixon Technologies - FY21 Performance:

• The Revenue from Operations has shown a good growth of 46.5% (YoY) from Rs. 4,400 Cr. in FY 20 to Rs. 6,448 Cr. in FY21.
• The Operating Profit of Dixon Technologies has delivered a decent growth of 28.7% (YoY) from Rs. 223 Cr. in FY20 to Rs. 287 Cr. in the FY21.
• The Operating Profit Margins (OPM) % has shown a falling trend by 60 basis points (bps) YoY from 5.1% in FY20 to 4.5% in FY21.
• Dixon Technologies delivered a strong rise in Profit before Tax (PBT) of 38.2% YoY, from Rs. 157 Cr. in the FY20 to Rs. 217 Cr. in the Financial Year 2021.
• The profit after tax (PAT) of Dixon Technologies has shown a steep growth of 32.2% (YoY) from Rs. 121 Cr. in FY20 to Rs. 160 Cr. in FY21.
• The Net Profit Margins (%) of the company have gone down by 30 bps (YoY) from 2.8% in FY20 to 2.5% in FY21.

Dixon Technologies- FY21 Performance

3.Dixon Technologies –

i) Revenue Mix:

a) Consumer Electronics:

• The revenue from Consumer Electronics has increased by 200% (YoY) every quarter from 393 Cr. in the Q4 of FY20 to Rs. 1,179 Cr. in the Q4 of FY21.
• On yearly basis, the revenue from Consumer Electronics has also increased by 83% (YoY) from 2,095 Cr. in the Q4 of FY20 to Rs. 3,843 Cr. in the Q4 of FY21.
• The overall share in revenue has grown from 46% in the Q4 of FY20 to 56% in Q4 of FY21.

b) Lighting Products:

• The revenue from Lighting Products has marginally increased by 51% (YoY) every quarter from 255 Cr. in the Q4 of FY20 to Rs. 282 Cr. in the Q4 of FY21.
• On yearly basis, the revenue from Lighting Products has decreased by 3% (YoY) from 1,140 Cr. in the Q4 of FY20 to Rs. 1,104 Cr. in the Q4 of FY21.
• The overall share in revenue has gone down from 30% in the Q4 of FY20 to 18% in Q4 of FY21.

c) Home Appliances:

• The revenue from Home Appliances has increased by 63% (YoY) quarterly from 90 Cr. in the Q4 of FY20 to Rs. 147 Cr. in the Q4 of FY21.
• On yearly basis, the revenue from Appliances has increased by 9% (YoY) from 396 Cr. in the Q4 of FY20 to Rs. 431 Cr. in the Q4 of FY21.
• The overall share has fallen from 10% in the Q4 of FY20 to 7% in Q4 of FY21.

d) Mobile & EMS Divisions:

• The revenue from Mobile & EMS Divisions has increased by 381% (YoY) quarterly from 60 Cr. in the Q4 of FY20 to Rs. 290 Cr. in the Q4 of FY21.
• On yearly basis, the revenue from Mobile & EMS Divisions has increased by 56% (YoY) from 537 Cr. in the Q4 of FY20 to Rs. 840 Cr. in the Q4 of FY21.
•  The overall share has grown from 7% in the Q4 of FY20 to 14% in Q4 of FY21.

e) Security System:

• The revenue from Security System has increased by 100% (YoY) quarterly from 55 Cr. in the Q4 of FY20 to Rs. 109 Cr. in the Q4 of FY21.
• On yearly basis, the revenue from Security System has slightly increased by 1% (YoY) from 216 Cr. in the Q4 of FY20 to Rs. 218 Cr. in the Q4 of FY21.
• The overall share has fallen from 6% in the Q4 of FY20 to 5% in Q4 of FY21.

f) Reverse Logistics:

• The revenue from Reverse Logistics has decreased by 18% (YoY) quarterly from 4.7 Cr. in the Q4 of FY20 to Rs. 3.8 Cr. in the Q4 of FY21.
• On yearly basis, the revenue from Reverse Logistics has decreased by 14% (YoY) from 13 Cr. in the Q4 of FY20 to Rs. 16 Cr. in the Q4 of FY21.
• The overall share has fallen from 1% in the Q4 of FY20 to less than 1% in Q4 of FY21.

Dixon Technologies- Revenue Mix

Dixon Technologies- Revenue Mix (%)

ii) Operating Profit Mix:

a) Consumer Electronics:

• The Operating Profit from Consumer Electronics has increased by 189% (YoY) quarterly from 9.8 Cr. in the Q4 of FY20 to Rs. 28.2 Cr. in the Q4 of FY21.
• On yearly basis, the Operating Profit from Consumer Electronics has also increased by 104% (YoY) from 50.3 Cr. in the Q4 of FY20 to Rs. 102 Cr. in the Q4 of FY21.

b) Lighting Products:

• The Operating Profit from Lighting Products has marginally increased by 21% (YoY) quarterly from 25.4 Cr. in the Q4 of FY20 to Rs. 30.7 Cr. in the Q4 of FY21.
• On yearly basis, the Operating Profit from Lighting Products has decreased by 0.3% (YoY) from 97.6 Cr. in the Q4 of FY20 to Rs. 97.4 Cr. in the Q4 of FY21.

c) Home Appliances:

• The Operating Profit from Home Appliances has increased by 4% (YoY) quarterly from 9.8 Cr. in the Q4 of FY20 to Rs. 10.3 Cr. in the Q4 of FY21.
• On yearly basis, the Operating Profit from Appliances has decreased by 14% (YoY) from 46.1 Cr. in the Q4 of FY20 to Rs. 39.7 Cr. in the Q4 of FY21.

d) Mobile & EMS Divisions:

• The Operating Profit from Mobile & EMS Divisions has decreased by 13.5% (YoY) quarterly from 8.5 Cr. in the Q4 of FY20 to Rs. 7.4 Cr. in the Q4 of FY21.
• On yearly basis, the Operating Profit from Mobile & EMS Divisions has increased by 107% (YoY) from 19.1 Cr. in the Q4 of FY20 to Rs. 39.6 Cr. in the Q4 of FY21.

e) Security System:

• The Operating Profit from Security System has increased by 66% (YoY) quarterly from 1.9 Cr. in the Q4 of FY20 to Rs. 3.1 Cr. in the Q4 of FY21.
• On yearly basis, the Operating Profit from Security System has slightly increased by 15% (YoY) from 7.2 Cr. in the Q4 of FY20 to Rs. 6.1 Cr. in the Q4 of FY21.

f) Reverse Logistics:

• The Operating Profit from Reverse Logistics has decreased by 77% (YoY) quarterly from 0.4 Cr. in the Q4 of FY20 to Rs. 0.1 Cr. in the Q4 of FY21.
• On yearly basis, the Operating Profit from Reverse Logistics has decreased by 63% (YoY) from 2.6 Cr. in the Q4 of FY20 to Rs. 1 Cr. in the Q4 of FY21.

Dixon Technologies- Operating Profit Mix

iii) Revenue & EBIT Mix

a) Consumer Electronics:

• The overall share in revenue from Consumer Electronics accounts for 45.8%, 62.3%, and 55.9% in Q4FY20, Q3FY21, and Q4 of FY21 respectively.
• The overall share in EBIT stands at 18%, 39%, and 35% in Q4FY20, Q3FY21, and in Q4 of FY21 respectively.

b) Lighting Products:

• The overall share in revenue from Lighting Products accounts for 29.7%, 16%, and 18.1% in Q4FY20, Q3FY21, and Q4 of FY21 respectively.
• The overall share in EBIT stands at 45%, 33%, and 38% in Q4FY20, Q3FY21, and in Q4 of FY21 respectively.

c) Home Appliances:

• The overall share in revenue from Home Appliances accounts for 10.5%, 5.3%, and 6.9% in Q4FY20, Q3FY21, and Q4 of FY21 respectively.
• The overall share in EBIT stands at 18%, 12%, and 13% in Q4FY20, Q3FY21, and in Q4 of FY21 respectively.

d) Mobile & EMS Divisions:

• The overall share in revenue from Mobile & EMS Divisions accounts for 7%, 13.7%, and 13.4% in Q4FY20, Q3FY21, and in Q4 of FY21 respectively.
• The overall share in EBIT stands at 15%, 14%, and 9% in Q4FY20, Q3FY21, and in Q4 of FY21 respectively.

e) Security System:

• The overall share in revenue from Security System accounts for 6.4%, 2.5%, and 5.2% in Q4FY20, Q3FY21, and Q4 of FY21 respectively.
• The overall share in EBIT stands at 3%, 2%, and 4% in Q4FY20, Q3FY21, and in Q4 of FY21 respectively.

f) Reverse Logistics:

• The overall share in revenue from Reverse Logistics accounts for 0.5%, 0.2%, and 0.2% in Q4FY20, Q3FY21, and Q4 of FY21 respectively.
• The overall share in EBIT stands at 1%, 0.5%, and 0.1% in Q4FY20, Q3FY21, and in Q4 of FY21 respectively.

Dixon Technologies- Revenue and EBIT Mix

Dixon Technologies- Revenue Mix Vs. Operating Profit Mix

iv) Segment-wise Operating Margins

a) Consumer Electronics:

• In Consumer Electronics, margins are constant at around 2.4%.
• Current Capacity (LED TV) - 4.4 mn TV Sets. The company is adding large TV sets and expanding capacity to 5.5 mn by Q2FY22.
• Investment in Injection Moulding for backward integration in LED TV Sets.
• Expected Profitability Range- 2.7%-2.9%.

b) Lighting:

• The lighting segment of the business has witnessed a heavy downfall in its operating margin on a year-on-year basis from 10% in Q4FY20 to 8.1% in Q4FY21.
• Here, Dixon is the Largest ODM player in India. It is having a Current LED Bulb Capacity- 300 mn which meets 45% of the Indian Requirement.
• The Contraction in the margin in this segment is due to the failure of passing on commodity prices to the consumers.

c) Home Appliances:

• In this segment also, Dixon has noticed a downfall in its Operating Margins from 11% in March 2020 to 7% in March 2021.
• Expanding capacity from 1.2 mn to 1.5 mn by Q2FY22 ends in the semi-automatic category.
• New facility for the fully automatic plant in Tirupati (Annual Capacity- 0.6 mn).
• Developing Outdoor Lighting Solutions.

d) Mobile & EMS Divisions:

• This business segment of Dixon Technologies has reported a strong downfall in its operating profit margin to 2.5% in the quarter ended 31^st March 2021 from 14.1% in March 2020.
• New factory set-up under PLI Scheme and initial ramp-up cost impacted the margins.

e) Consolidated Business:

• In overall business, Dixon has reported de-growth in its operating margins from 6.5% in Q4FY20 to 4.6% in Q3FY21, and finally 3.8% in the quarter ended 31^st March 2021.

Dixon Technologies- Segment-wise Operating Margins

4) Dixon Technologies - EBITDA Margin Concerns:

• Gross Margins & EBITDA Margins contraction on YoY was primarily driven due to substantial change in segments mixed with a higher increase in the share of business during the quarter from LED TVs- an OEM business with a lower margin.
• Also, there was a rise in price on the commodity side, which impacted the OEM business.
• EBITDA was also factored in because of ESOP Expenses of around Rs. 8 Cr. in Q4FY21 on account of newbies of plan 2020.
• In the ODM business- primarily lighting & washing machines, the company lagged in passing on the increase of commodity prices to the consumer. Hence, had a negative impact.

    Positive-

• Through Calibrated Price Increases, Inventory Planning, and Value Engineering, the company will manage the margins in the ODM business.
• The company expects margins to range between 4.2%- 4.5% in the coming years.

5. Dixon Technologies - FY22 Outlook:

• PLI Revenue Booking and Mobile Phone division have started in Q4FY21.
• Value and Volume growth in LED TVs as they are getting a new product SKU that is LED Monitors and for this tied up with 2 largest global brands for manufacturing LED Monitors.
• Business Opportunities in Lighting segments in International Ground:

i) Dixon’s capacity is at 300 million bulbs which is 45% of India’s capacity.

ii) The Company is in discussion with large international retail chains for export arrangements which can commence by mid of Q2FY22.

• Dixon Technologies is planning to get into new verticals (fully automatic top-load washing machine, refrigerators, wearable).
• The company is planning on further diversification prospects through its upcoming PLI schemes (IT products like laptops and tablets, telecom equipment).
• The CAPEX of the company will be around Rs. 200 Cr. in FY22. Telecom-related CAPEX would be Rs. 50 Cr. and Refrigerator-related CAPEX would be Rs. 100 Cr. incoming 1-1.5 years. 

6. Valuations:

• The stock P/E as of 28 May 2021 stands at 147.66 which is higher than 1 Year Median P/E and around 3 times of 3 Year and 5 Year Median P/E.
• The ROCE of Dixon Technologies is very good and at 31.4%, whereas, the ROE stands at 25%.
• The company has a free cash flow of Rs. 2.16 Cr. The company has a healthy debt-to-equity ratio of only 0.21.

Dixon Technologies- Valuation & Ratios