Dixon Technologies Ltd is a company that produces consumer electronics, lighting solutions, and home and security appliances. The company has televisions, washing machines, laptops, LED lamps, battens, downlighters, and CCTV surveillance systems for Samsung, Xiaomi, Panasonic, and Philips.
In 2017, the business and Flipkart reached an agreement for the company to use the MARQ trademark to design and produce televisions, washing machines, and other electronic appliances for Flipkart. Dixon and Xiaomi entered a contract in 2018 to manufacture LED television sets at its Tirupati plant.
Dixon and Samsung teamed up in January 2020 to produce LED televisions for the regional market. In December 2020, Motorola and Padget Electronics, a Dixon subsidiary, agreed to a smartphone manufacturing agreement. BoAt and Dixon have a contract to produce wireless speakers. The Dixon share price at the time of writing the article is Rs. 4243.20, and its market capitalisation stands at Rs. 25,278.51.
Now, here are the highlights of Dixon Technologies for the investors to remember:
- Q1FY23 results show the following:
- Strong mobile and EMS market growth saw revenues increase by 53% yearly to Rs. 2,855 crore (up 4x YoY). Meanwhile, revenues in the consumer electronics industry fell by 26% YoY.
- Gross margin rises by 170 bps YoY due to price increases and improved product mix. However, a single Forex loss restricts EBITDA margin growth to 94 basis points YoY to 3.5%.
- PAT increased 150% YoY to Rs. 46 crore, tracking stronger sales and increased EBITDA margin in the first quarter.
- The company has low debt.
- Dixon has seen growth in its quarterly net profit with an increase in profit margins (YoY).
- Some of the key triggers for future performance are as follows:
- The Indian EMS market is worth $23.5 billion. With a market share of between 3 and 4% currently, Dixon has room for development.
- Under the PLI scheme, the domestic mobile output is anticipated to increase by 5x to 10.5 lakh crore by FY26, proving to be a winning situation for Dixon.
- Future revenue growth for Dixon will be driven by new sectors such as electronics/IT products, telecom products, LED lights, and AC components.
Since Dixon has given a return of 38% in the past five years (from Rs. 2,602 in July 2017 to Rs. 3,595 levels in July 2022), the investor can consider buying the share and holding it for a longer duration.However, there have been some negative aspects as well, which are as follows:
- RoCE has decreased over the past two years due to inefficient capital utilisation to produce profits.
- Ineffective use of shareholder money: ROE has decreased over the past two years.
- Assets are being used inefficiently to make money, and ROA has decreased during the past two years.
With the positive outlook, no wonder investors are investing heavily in the Dixon share price. However, all the aspects should be considered along with the negatives.