Q4 FY22 (JAN-MAR 2022) Concall Summary

DIXON TECHNOLOGIES (INDIA) LIMITED

Concall Date: 30 May 2022

Revenue: ₹2,952.8 cr (▲40.0%) Net Profit: ₹63.1 cr (▲42.6%)

FINANCIAL HIGHLIGHTS
PARTICULARS Q4 FY22 Q4 FY21 Change % FY22 FY21 Change %
(₹ cr) (₹ cr) YoY (₹ cr) (₹ cr) YoY
Revenue from Operations 2,953 2,110 40% 10,697 6,448 65.9%
Net Profit 63 44 42.6% 190 160 19.1%
EBITDA Margin 4.1% (Q4) 3.6% (FY22)
ROE st
21.9% (as on 31 Mar 2022)
ROCE 24.9% (as on 31st Mar 2022)
Final Dividend ₹2/share (FY22)

• The operating profit margins (excluding other income) of the company improved sequentially from
3.4% in Q3 FY22 to 4% in Q4 FY22. This was on account of operating leverage, continued
improvement in the cost structure across all businesses and implementation of strategic price
increases across ODM (original design manufacturer) business of washing machine & lightings.
• In FY22, it witnessed healthy growth across all the business verticals despite headwinds like raw
materials’ inflationary pressures, geo-political concerns and consumption set backs caused by the
Covid disruption.
• In FY22, there was ~₹8-₹9 crore of income received as an incentive claim from PLI (production linked
incentive) scheme.
• As on 31st March 2022, the net debt stood at ₹140.6 crore.

OPERATING HIGHLIGHTS
• The company undertook a price hike of ~1.75%-2% in the washing machine division and ~1%-1.5% in
the lighting division. It is going to further increase price in the coming month or quarter.

BUSINESS HIGHLIGHTS
CONSUMER ELECTRONICS
• The revenue contribution during FY22 declined to 48% from 60% in FY21.
• During the quarter, the revenue from this segment stood at ₹1,010.4 crore with sequential
improvement in operating profit margins by 60 bps.
• It has a capacity to cater to 35% of India’s requirement.
 Concall Summary
DIXON TECHNOLOGIES (INDIA) LTD

• The company has a total area of ~4,50,000 sq ft in Tirupati campus. It is further investing in adding
complete assembly lines of TVs and injection molding lines in the campus, in line with the backward
integration strategies.
• As announced in Q3 FY22, regarding large order under ODM business from the largest global brand,
the company had commenced business in May 2022, and it expects significant volumes from the
brand in FY23.
• It expects LED volumes to increase by ~40% in FY23, from 3 million sets produced in FY22, mainly on
account of this order win. It further expects margins to be in the similar range or to improve due to
operating leverage as well as through backward integration.
• It received orders from two of the largest global brands for manufacturing LED monitors and the
production for one of the brands has already commenced in April 2022. The expected volumes this
year would be in the range of ~0.5 million and it expects the order book to significantly increase in
the coming years.

LIGHTING
• The revenue contribution during FY22 declined to 12% from 17% in FY21.
• The operating profit margins improved sequentially by 60 bps to 7.1% in Q4 FY22. This was on
account of passing on the input cost increase to the customers and various cost efficiency measures
taken by the company. It expects operating profit margins to normalize by Q2 FY23.
• In LED bulb it has a capacity of ~300 million which is ~50% of the country’s requirement, in Battens it
has a capacity of ~5 million per month v/s requirement of 9 million per month of the country and in
Downlighters it has a capacity of ~1.5 million per month as against requirement of 3 million per
month of the country.
• It is closely working with global customers and expects to start with exports in FY23 on getting
product approvals.
• The company formed a subsidiary named Dixon Technologies Solutions Pvt Ltd for its LED lighting
components business as it is a beneficiary of the PLI scheme. The total investment in this subsidiary
would be ~₹100 crore over a period of 5 years. It would be making an investment of ~₹20 crore in
FY23.

HOME APPLIANCES
• The revenue contribution during FY22 was flat at 7% YoY.
• The revenue from the fully automatic washing machines which the company started in December
2021 was ~₹33 crore. It is witnessing volume increase on a month-on-month basis.
• The operating profit margins improved sequentially by 120 bps to 7.9% in Q4 FY22. This was on
account of passing on the impact of commodity cost increase to the customers.
• The company currently has more than 160 models in the fully automatic washing machines category
with portfolio ranging from 6kg- 14kg. It’s planning to increase its capacity to 2.4 million, going
forward.
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DIXON TECHNOLOGIES (INDIA) LTD

• Its additional infrastructure footprint in Dehradun would be ready in next couple of months to meet
the increased demand ahead of the festive seasons.
• The company expects ~30% overall growth in volumes under this category. It targets for 1.6 million
volume in FY23 compared to 1.1 million in FY22 under semi-automatic category.
• Under the fully automatic category, it has a capacity of 0.6 million with 96 variants ranging from 6.5
kg-11kg with Bosch as an anchor customer. Recently, it added new customers like Lloyd & Thomson
and also got into an agreement with big customers whose production is likely to commence by Q2
FY23.
• The company is focusing on making this segment more R&D (research and development) driven to
serve the industry with the latest and more innovative technologies.

MOBILE & EMS DIVISION

• The revenue contribution during FY22 increased sharply to 29% from 13% in FY21.
• The Motorola business has ramped up with monthly volume stretching up to ~4 lakhs. It has a strong
order book (including domestic and export markets) of ~1.5 million up to Q2 FY23. It expects
monthly volumes to increase to ~5 lakhs.
• It started manufacturing of Nokia feature phones in addition to the smartphones which the
company was already manufacturing. The monthly volumes once stabilized would be ~0.5 million
per month.
• It onboarded Itel as its new customer in the feature phone category with annual volumes expected
to be ~1 million and the production of the same is likely to commence by June 2022.
• For meeting the demand for this new customer, the company has taken a new 2,00,000 sq. ft facility
in Noida.
• The order book in the Samsung smartphones has increased significantly from ~1 million to ~1.5
million a month and is expected to grow to ~1.7 million in the coming months. The company is
making more investments for Samsung 4G & 5G smartphones.
• The company achieved its ceiling revenues, capex and investment thresholds for FY22 under PLI
scheme (1st year) and it expects the incentive claims to be received in the coming months.
• Under the set top box vertical, it manufactured 6.6 lakhs units for Jio, Dish TV, Siti Cable & Sun TV
and reported revenue of ₹77 crore with 2.3% operating margin during the quarter. The order book in
this vertical looks stable, going forward.

SECURITY SERVICES
• The revenue contribution during FY22 increased marginally to 4% from 3% in FY21.
• The order book in the segment was healthy and the company is looking for capacity expansion from
~10 million per annum to ~14 million per annum by Q2 FY23. It would be relocating from its existing
facility located at Tirupati.
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DIXON TECHNOLOGIES (INDIA) LTD

CAPITAL EXPENDITURE
• The capex for FY22 stood at ~₹400 crore. The capex for FY23 is expected at ~₹340 crore which would
be a combination of PLI related capex, expansion, construction and advances for the refrigerator
project.

UPDATES
• Refrigerator segment: The capacity for refrigerators would be ~1.2 million under direct cool (DC)
category which would be expanded to frost free category as well. The market for DC refrigerators is
10 million units and 4 million units for frost free and the other categories. The product designs have
been made and technology partner has been finalised. The company has a land bank of ~20 acre in
greater Noida and the construction is expected to commence soon. The production is expected to
commence from Q2 FY24.
• Laptops, Tablets & IT hardware: The company is in advance discussion of an agreement for
manufacturing of Tablets with one of the largest brand and the production is likely to commence by
Q2 FY23.
• Telecom & Networking product: The company started manufacturing ONT’s (optical network
terminal) for Bharti Airtel Ltd. It has a strong order book under this category. It is a joint venture (JV)
with Beetel. The company is one of the beneficiaries of PLI for telecom and networking products.
• Inverter Controller Boards for air conditioners: The total investment required to be made over a
period of 5 years is ~₹51 crore. It would be a 60:40 JV and Dixon’s share of contribution would be
~₹20 crore. It finalised the manufacturing location in Noida and the production is expected to
commence in Q2 FY23.
• Wearable & Hearables segment: The company formed 50:50 JV partnership with Boat for
manufacturing wearables and hearables. Currently, it is manufacturing largest selling SKU (stock
keeping unit) which is TWS (true wireless stereo) with an estimated yearly order volume of ~7
million units and would soon start production of neckband which is high selling SKU for Boat with an
estimated yearly order volume of ~4 million units at their Noida facility. As the partnership
strengthens, the company expects more categories would come into the JV like bluetooth speakers
and smart watches.

FUTURE OUTLOOK
• The company is targeting an overall revenue growth of ~55%-60% for FY23 and this would be
significantly led by the mobile division. The operating profit margins to be in the range of ~4%-4.25%
for FY23.
• The management targets revenue from the mobile division to be ~₹7,000-₹7,500 crore in FY23,
which would be led by Motorola and within Motorola ~60% of the contribution would be from the
North America markets.
• The management doesn’t expect any significant buoyant growth in the lighting division. However,
there may be some improvement in Battens and Downlighters volumes whereas LED bulb volumes is
expected to remain constant in the forthcoming months.
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DIXON TECHNOLOGIES (INDIA) LTD

• It targets a return on capital employed (ROCE) and Return on Equity (ROE) of ~30% and ~24%-25%
in the next 3-4 quarters.

SEBI Registration no: IHN3000007493

Disclaimer:

This document has been prepared to provide a brief summary of the conference call conducted by the companies
and is intended to be used for learning enhancements. Nothing contained herein should be construed as a
recommendation on any stock or sector.