India EMS Industry Sector IC Report
India EMS Industry Sector IC Report
India EMS Industry Sector IC Report
www.systematixgroup.in
Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters Systematix Shares and Stocks (India) Limited 1
Systematix
Institutional Equities
ELIN
IKIO
KAYNES
DIXON
AMBER
PGEL
AVALON
Investors are advised to refer disclosures made at the end of the research report.
Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters Systematix Shares and Stocks (India) Limited 1
12 July 2023 India EMS Industry
Contents
EMS companies – peer valuation comparison ..................................................................................................................... 3
Indian EMS industry slated to post 32% CAGR to Rs ~6tn by FY27 ........................................................................................ 8
Players positioning – Product and service diversification across industries are keys to growth ............................................11
Product positioning – EMS companies choose between volumes and margins ....................................................................12
COMPANY SECTION
Amber Enterprises – (Initiate with BUY, TP: Rs 2,590; 17% upside potential) .......................................................................19
Avalon Technologies – (Initiate with BUY, TP: Rs 752; 21% upside potential) ......................................................................27
Dixon Technologies – (Initiate with BUY, TP: Rs 4,966; 15% upside potential) .....................................................................35
Elin Electronics – (Initiate with BUY, TP: Rs 197; 24% upside potential) ...............................................................................44
Kaynes Technology – (Initiate with BUY, TP: Rs 1,930; 16% upside potential) ......................................................................58
PG Electroplast – (Initiate with BUY, TP: Rs 1,806; 16% upside potential) ............................................................................66
Syrma SGS Technology – (Initiate with BUY, TP: Rs 560; 25% upside potential) ...................................................................72
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12 July 2023 India EMS Industry
Note: Global companies reporting period differ. We have considered March ending period based on closest available data.
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12 July 2023 India EMS Industry
Stock Views
AMBER (Initiate with BUY, TP: Rs 2,590; 17% upside potential)
AMBER – Financial Snapshot (Rs mn) We initiate coverage on Amber Enterprises (AMBER) with a BUY rating and a target
Y/E Mar FY23 FY24E FY25E price of Rs 2,590, based on 28x FY25E EPS of Rs 93. Post strong recovery in FY23
Net sales 69,271 80,223 95,155 (revenue/EBITDA/PAT up 65%/52%/47% YoY), management has guided 15-20%, 35-
EBITDA 4,179 5,305 6,740 40% and 30-35% growth, respectively, in its Mobility, Electronics and Motor divisions
OPM % 6.0 6.6 7.1 for FY24. The RAC and Components division is expected to outpace industry growth
PAT (adj.) 1,572 2,173 3,117 (likely flattish). AMBER aims to expand its RoCE to 19-21% (<15% currently) over next
EPS (adj.) (Rs) 46.7 64.5 92.5 2-3 years. Thus, after 20%/11%/flat CAGR in revenue/EBITDA/PAT over FY20-23, we
PE (x) 47.5 34.3 23.9
expect the company to record 17%/27%/41% CAGR over FY23-25E, with 105bps
P/B (x) 3.9 3.5 3.1
expansion in its EBITDA margin to ~7%. ROIC too is expected to expand ~400bps to
RoE (%) 8.2 10.3 12.9
RoCE (%) 13.3 12.5 14.7 16.4% in FY25E.
Net-D/E (x) 0.3 0.3 0.3
AVALON (Initiate with BUY, TP: Rs 752; 21% upside potential)
AVALON – Financial Snapshot (Rs mn) We initiate coverage on Avalon Technologies (AVALON) with a BUY rating and a
Y/E Mar FY23 FY24E FY25E target price of Rs 752, based on 40x FY25E EPS of Rs 19. After a soft FY23
Net sales 9,447 11,750 14,160 (revenue/EBITDA up 12%/16%, PAT down 17% YoY), management aims to at least
EBITDA 1,128 1,426 1,747 double its revenue over the next three years, led by 30-40% CAGR in its Aerospace
OPM % 11.9 12.1 12.3 and Clean Energy verticals. The company expects order book and revenue build up
PAT (adj.) 525 883 1,090 from the marquee clients and projects it has acquired in the last six months. Current
EPS (adj.) (Rs) 9.1 15.2 18.8 low plant utilisation (~60%), ~Rs 600mn capex over next two years and high asset
PE (x) 68.4 40.7 33.0 turnover (~10x) provide strong headroom for growth. AVALON also aims to reduce
P/B (x) 6.7 5.7 4.9
its Net Working Capital (NWC) days (148 currently) by 10-15 days on lower inventory
RoE (%) 9.8 14.1 14.8
days, and thus improve its cash flows. A healthy order book (Rs 12.3bn, 1.3x FY23
RoCE (%) 17.3 16.2 18.6
Net-D/E (x) (0.2) (0.1) (0.1) revenue) and 25%+ RoIC are other positives. Post 14%/20%/66% CAGR in revenue/
EBITDA/ PAT over FY20-23, we estimate 22%/24%/44% CAGR over FY23-25E, with
~250bps expansion in its RoIC to 26% in FY25E.
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12 July 2023 India EMS Industry
ELIN (Initiate with BUY, TP: Rs 197; 24% upside potential)
ELIN – Financial Snapshot (Rs mn) We initiate coverage on Elin Electronics (ELIN) with a BUY rating and a target price of
Y/E Mar FY23 FY24E FY25E Rs 197, based on 15x FY25E EPS of Rs 13. FY23 was muted (revenue/EBITDA/PAT
Net sales 10,755 12,368 14,223 down 2%/18%/32% YoY), impacted by delays in product launches and downtrading
EBITDA 652 898 1,090 in small appliances. Management expects low-to-mid-teen revenue growth, with
OPM % 6.1 7.3 7.7 EBITDA margin of 7-7.5% in FY24, led by fans (flat in FY23) on new launches
PAT (adj.) 269 495 628 (TPW/BLDC fans). Lower realisation will likely restrict Lighting revenue. In small
EPS (adj.) (Rs) 5.6 10.3 13.1 appliances, mixer grinder capacity for entry and mid-range products is expected to
PE (x) 28.2 15.3 12.1 be operational by Sep 2023. Backward integration through PLI scheme for LED
P/B (x) 1.5 1.4 1.3 lighting could drive margins. Thus, post 11%/6%/-1% CAGR in revenue/EBITDA/PAT
RoE (%) 5.5 9.2 10.5
over FY20-23, we estimate 15%/29%/ 53% CAGR over FY23-25E. RoIC too should
RoCE (%) 9.8 12.2 13.9
expand 580bps to ~17% in FY25E.
Net-D/E (x) (0.1) (0.1) (0.1)
KAYNES (Initiate with BUY, TP: Rs 1,930; 16% upside potential)
KAYNES – Financial Snapshot (Rs mn) We initiate coverage on Kaynes Technology (KAYNES) with a BUY rating, and a target
Y/E Mar FY23 FY24E FY25E price of Rs 1,930, based on 60x FY25E EPS of Rs 32. Robust industry tailwinds and
Net sales 11,261 15,203 19,763 KAYNES’ strong focus on the entire customer value chain has helped the company in
EBITDA 1,683 2,303 3,033 maintaining a superior business profile over peers. After posting strong FY23
OPM % 14.9 15.1 15.3 numbers (revenue/ EBITDA/PAT up 59%/80%/128% YoY), management is heading for
PAT (adj.) 952 1,440 1,870 30-40% CAGR in revenue over next few years, based on order booking from
EPS (adj.) (Rs) 16.4 24.8 32.2
customers. KAYNES’ Rs 26.5bn order book (2.4x FY23 revenue), Rs 2.2bn capex in
PE (x) 101.3 67.0 51.6
FY24 (to triple capacity) and ~5x asset-turnover provide robust outlook on growth for
P/B (x) 10.1 8.7 7.5
RoE (%) 9.9 13.1 14.5
KAYNES. Likely lower NWC days (99 currently) should boost cash flows. Post
RoCE (%) 21.1 17.9 20.0 45%/60%/116% CAGR in revenue/EBITDA/PAT over FY20-23, we estimate
Net-D/E (x) (0.3) (0.2) (0.1) 32%/34%/40% CAGR over FY23-25E, with healthy 26% RoIC despite high capex.
PGEL (Initiate with BUY, TP: Rs 1,806; 16% upside potential)
PGEL – Financial Snapshot (Rs mn) We initiate coverage on PG Electroplast (PGEL) with a BUY rating, and a target price
Y/E Mar FY23 FY24E FY25E of Rs 1,806, based on 28x FY25E EPS of Rs 64. Post strong FY23 (revenue up 96% YoY
Net sales 21,599 28,020 35,136 at Rs 21.5bn, EBITDA margin stable at 8.4%, PAT up 107%, and RoE/RoCE of
EBITDA 1,760 2,284 2,864 ~19%/~22%), management aims for 30% YoY growth in FY24, led by 43% rise in the
OPM % 8.2 8.2 8.2 product business (WM, RACs, Coolers; likely revenue of Rs 19.2bn), which would
PAT (adj.) 775 994 1,369 contribute to 68% of revenue (44%/62% in FY22/FY23). Its WC cycle is expected to
EPS (Rs) 36.5 46.8 64.5 improve once sourcing shifts from China to domestic vendors. While operating
PE (x) 42.6 33.2 24.1 margins across segments may remain stable, a change in the mix could limit overall
P/B (x) 8.9 7.2 5.6
margins. PGEL intends to incur Rs 1.8bn capex (funded via internal accruals) on RACs
RoE (%) 19.6 20.1 21.7
(to double capacity) and other products. PLI benefit of Rs 150mn is expected in FY24.
RoCE (%) 17.2 17.3 18.8
Net-D/E (x) 1.3 1.3 1.0 Post 50%/64%/209% CAGR in revenue/EBITDA/PAT over FY20-23, we estimate
28%/28%/33% CAGR over FY23-25E with ~200bps expansion in its RoE to 22%. RoIC
is also likely to expand to ~19% over FY23-25E, from 9.6% currently.
SYRMA (Initiate with BUY, TP: Rs 560; 25% upside potential)
SYRMA – Financial Snapshot (Rs mn) We initiate coverage on Syrma SGS (SYRMA) with a BUY rating, and a target price of
Y/E Mar FY23 FY24E FY25E Rs 560, based on 40x FY25E EPS of Rs 14. After a robust FY23 (revenue/EBITDA/PAT
Net sales 20,484 27,653 35,949 up 62%/49%/61% YoY on proforma basis), management has guided for over 35-40%
EBITDA 1,878 2,646 3,583 revenue growth in the medium term, backed by industry tailwinds and marquee
OPM % 9.2 9.6 10.0 customer additions (~10 in FY23). The revised PLI scheme for IT hardware would
PAT (adj.) 1,193 1,813 2,474 further drive growth. EBITDA margin may touch double-digits from 9.2% in FY23.
EPS (adj.) (Rs) 6.7 10.3 14.0 Improvement in asset turnover (<2x in FY23), backed by ramp up at its new
PE (x) 66.4 43.7 32.0 capacities and better NWC capital days (90 days in FY23) should boost its current
P/B (x) 5.1 4.7 4.3 subpar return ratios (~15% RoIC). It aims to incur a capex of >Rs 2bn in FY24, with an
RoE (%) 7.7 10.8 13.3
asset turnover of ~6x. Post 33%/11%/11% CAGR in revenue/ EBITDA/PAT over FY20-
RoCE (%) 14.9 13.8 17.7
23, we estimate 32%/38%/44% CAGR over FY23-25E, with RoE and RoIC expanding
Net-D/E (x) 0.1 (0.1) (0.1)
~550bps to ~13% and ~21%, respectively, in FY25E.
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12 July 2023 India EMS Industry
Story in charts…
Exhibit 5: Revenue, EBITDA margin, PAT margin (FY23) Exhibit 6: Revenue CAGR
(Rs bn) (%) (%)
22.3
200 25 80
14.9
11.9
9.2
KAYNES, 45
8.2
PGEL, 50
4.2 6.0 6.1
SYRMA (P), 33
150 9
SYRMA (P), 32
DIXON, 40
15.6 60
KAYNES, 32
5.8 8.5
3.6 5.6
IKIO (P), 26
2.1 2.3 2.5
AVALON, 22
100 (8)
PGEL, 28
DIXON, 23
AMBER, 20
AMBER, 17
AVALON, 14
40
50 (24)
ELIN, 15
ELIN, 11
122 69 22 20 11 11 9 4
0 (40) 20
DIXON AMBER PGEL SYRMA KAYNES ELIN AVALON IKIO (P)
(P)
0
Revenue EBITDA margin (RHS) PAT margin (RHS) FY23-25E FY20-23
PGEL, 64
80 30
KAYNES, 15.3
KAYNES, 14.9
SYRMA (P), 38
AVALON, 12.3
AVALON, 11.9
SYRMA (P), 10.0
IKIO (P), 38
23
KAYNES, 34
60
AVALON, 20
PGEL, 28
AMBER, 7.1
PGEL, 8.2
PGEL, 8.2
AMBER, 6.0
SYRMA (P), 11
ELIN, 7.7
40 15
DIXON, 4.5
ELIN, 6.1
DIXON, 4.2
AMBER, 11
ELIN, 6
20 8
0 0
FY23-25E FY20-23 FY25E FY23
(%) (%)
230 70
59
KAYNES, 116
170 53
AVALON, 66
SYRMA (P), 44
AVALON, 44
IKIO (P), 47
KAYNES, 40
31
AMBER, 41
110 35
ELIN, 53
DIXON, 39
SYRMA (P), 11
DIXON, 29
PGEL, 33
AMBER, (0)
ELIN, (1)
15
50 18
7
0
(10) 0
FY23-25E FY20-23 AVALON SYRMA (P) KAYNES IKIO (P) ELIN
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0
15
30
45
60
(%)
(%)
0
30
90
60
120
(50)
50
100
150
(%)
DIXON, 36
SYRMA (P), 89
12 July 2023
100
Home
AVALON, 26
DIXON -
DIXON, 81
Appliances
KAYNES, 26
AMBER, 62
FY25E
PGEL, 19
FY25E
Lighting
DIXON -
ELIN, 45
KAYNES, 28 ELIN, 17
23
DIXON -
Consumer
Electronics
Exhibit 11: ODM revenue mix (FY23)
IKIO (P)
DIXON, 140 AVALON, 26
AMBER, 68 KAYNES, 32
PGEL, 25 SYRMA (P), 16
18
FY23
FY23
ELIN, 92 PGEL, 10
SYRMA (P)
0
13
25
38
50
(%)
0
40
80
120
160
(1)
0
1
2
3
(x)
(Days)
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Exhibit 14: RoE (%)
FY23
FY25E
SYRMA (P), 13
FY25E
KAYNES, (0.3)
Aided from
IPO proceeds
PGEL, 1.0 DIXON, 20 AVALON, 148
PGEL, 20 KAYNES, 135
AMBER, 0.3 AVALON, 10 SYRMA (P), 90
SYRMA (P), (0.1) KAYNES, 10 ELIN, 66
FY23
FY23
FY25E
DIXON, (0.0) SYRMA (P), 8 PGEL, 68
ELIN, (0.1) AMBER, 8 AMBER, 29
AVALON, (0.1) ELIN, 5 DIXON, 7
KAYNES, (0.1) IKIO (P), 43 IKIO (P), 140
7
12 July 2023 India EMS Industry
Source: Kaynes | *Others include: Mobile Phones, CEA (Consumer electronics and appliances), IT (Information Technology products), Lighting, Energy, etc.
Exhibit 18: EMS’ contribution to electronics market in Exhibit 19: India EMS industry: growth, OEM-ODM mix trend
key economies (FY22); India sees large potential
(%) (Rs
(Rs bn)
bn) 5,995
5,995
45 6,000
6,000 CAGR (FY17-22): 22.2%
39 EMS
India to scale up CAGR (FY22-27): 32.5%
35
faster to reach 4,502
4,502
34 32 4,500 ODM CAGR (FY17-22): 22.2%
global average
ODM
CAGR (FY22-27): 32.4%
3,280
3,280 4,778
OEM 4,778
23
3,000
23 3,000 OEM CAGR (FY17-22): 22.5% 2,453
2,453 3,597
CAGR (FY22-27): 33.0% 3,597
1,846
1,469 1,846 2,624
2,624
1,500 1,064 1,172 1,469 1,962
1,500 869
11 538 689 1,064 1,172 1,176 1,479 1,962
869 940 1,479
538 689 697 853
1,176 905
1,217
432 553 656
853
211 940
232 292 367 491 1,217
0 106 136 172
697 905
432 553 656
232 367
292 FY23E 491
0 0 FY17
106 FY18
FY19
136172 211
FY20 FY21 FY22 FY24E FY25E FY26E FY27E
Global India China USA FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E
Source: Cyient DLM, Systematix Institutional Research Source: Cyient DLM, Systematix Institutional Research
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12 July 2023 India EMS Industry
Exhibit 20: India EMS market – growth outlook of various end-user industries
FY22 End-user Industries FY27E
(Rs 1.4tn, USD 20bn) CAGR (FY22-FY27E) (Rs 6tn, USD 80bn)
3% 4%
4% 2% Mobile Phones (33%) 3% 2%
4% 4%
Consumer Elec. & Appl (34%) 2%
4%
2%
2% Lighting (35%)
4%
4% IT (36%)
Telecom (21%)
• Data centre storage solutions, BTS, GPON, IP PBX, Network infra (4G
and 5G) related solutions are the key offerings of the EMS companies
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12 July 2023 India EMS Industry
Exhibit 22: Increasing sizes of RAC and RAC-component industries; AMBER has gained hefty market share
Source: Amber * company estimates # RAC components include sheet metal, injection molding, copper, heat exchangers, motors, PCBA and cross-flow fans ^ excl. GST
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12 July 2023 India EMS Industry
Players positioning – Product and service diversification across industries are keys to growth
Exhibit 23: Positioning of key EMS companies
Source: Avalon
Exhibit 24: Diversified product offerings by key EMS companies in the non-consumer verticals
Source: Kaynes Note: PCB/PCBA/Box build content mix is highest in IoI/IT (40-50%) followed by Telecom (~30%), Industrial (20-30%) and Aerospace/defense (15-25%)
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12 July 2023 India EMS Industry
PGEL
DIXON AMBER
ELIN
SYRMA KAYNES
AVALON IKIO
Exhibit 27: Chain of product service offerings and margin profile Exhibit 28: Services offered by EMS cos. in non-consumer verticals
Margin profile
PCB Assembly Box Assembly
Low High Assembly of components on Housing of PCBA in a small
bare PCBs enclosure
Product Design
Conceptualizing and design Repair and Rework Services
of electronic products Repair and remanufacturing
(Hardware design, software process
and firmware design)
Source: Avalon, Systematix Institutional Research Source: Avalon, Systematix Institutional Research
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12 July 2023 India EMS Industry
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12 July 2023 India EMS Industry
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12 July 2023 India EMS Industry
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12 July 2023 India EMS Industry
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12 July 2023 India EMS Industry
2,409 581
2,148 488
1,886 394
1,625 300
Oct-22
Nov-22
Jan-23
Apr-23
Jul-22
Jul-23
Aug-22
Feb-23
May-23
Apr-23
Jul-23
May-23
Jun-23
DIXON ELIN
5,000 250
4,250 213
3,500 175
2,750 138
2,000 100
Jan-23
Feb-23
Apr-23
Dec-22
Mar-23
Jul-23
Jun-23
May-23
Oct-22
Nov-22
Jan-23
Apr-23
Jul-22
Jul-23
Aug-22
Feb-23
May-23
IKIO KAYNES
480 1,900
455 1,525
430 1,150
405
775
380
400
16-Jun-23
19-Jun-23
22-Jun-23
25-Jun-23
28-Jun-23
01-Jul-23
04-Jul-23
07-Jul-23
Nov-22
Jan-23
Apr-23
Jul-23
Feb-23
May-23
PGEL SYRMA
2,000 500
1,625 419
1,250 338
875 256
500 175
Oct-22
Jan-23
Apr-23
Jul-23
Nov-22
Aug-22
Feb-23
May-23
Oct-22
Jan-23
Apr-23
Jul-22
Jul-23
Nov-22
Aug-22
Feb-23
May-23
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12 July 2023 India EMS Industry
COMPANY SECTION
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Systematix
Institutional Equities
Jan-23
Nov-22
Apr-23
Jul-23
Jul-22
Aug-22
May-23
Feb-23
Investors are advised to refer disclosures made at the end of the research report.
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12 July 2023 Amber Enterprises
Story in charts
Exhibit 1: Revenue growth trend Exhibit 2: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
100 95.2 20 10
FY20-23 CAGR: 20% 16.7 17.1
16.1 15.5 15.7
FY23-25E CAGR: 17% 80.2 15.3
69.3 15 8
75 7.8
7.3 7.1
6.5 6.6
10 6.0 5
50 42.1
39.6
30.3 4.0
5 3.3 3
2.7 2.6 2.7
25 2.3
0 0
FY20 FY21 FY22 FY23 FY24E FY25E
0
FY20 FY21 FY22 FY23 FY24E FY25E Gross margin EBITDA margin (RHS) PAT margin (RHS)
159
4.0 FY20-23 CAGR: 0% 5 180
148
4.0 FY23-25E CAGR: 41%
129
121
121
121
114
3.0 3.3 4 135
102
2.7 2.7
2.6 93
90
90
86
2.3
79
73
2.0 3 90
60
58
60
60
56
39
37
29
29
29
1.0 1 45
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
14 0.2
9 0.1
10 9 13
10 0.1
0.0
8
5
6
5 (0.1)
0
FY20 FY21 FY22 FY23 FY24E FY25E
(0.3)
ROE ROIC FY20 FY21 FY22 FY23 FY24E FY25E
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12 July 2023 Amber Enterprises
Exhibit 7: Revenue mix (%) trend Exhibit 8: RAC and Components - Revenue, margin trend
100% (Rs bn) (%)
5 4 6 4 5 5 FY20-23 CAGR: 20%
6 7 7 6 6 6 80 10
FY23-25E CAGR: 15%
16 15 15 16 18 19
75%
15 60 8
20 7.9 5.8
25 30 7.5
30 30
50% 6.5
40 5.8 5
5.6
59 54
25% 48 20 3
43 41 40
29.3 22.5 30.7 50.7 56.9 66.6
0% 0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E
RAC Components Electronic PCB Mobility Motors Revenue EBITDA margin (RHS)
Exhibit 9: Motors - Revenue, margin trend Exhibit 10: Electronic PCBs - Revenue, margin trend
(Rs bn) (%) (Rs bn) (%)
6.0 FY20-23 CAGR: 18% 16 24 6
13.7 FY20-23 CAGR: 22%
FY23-25E CAGR: 22% FY23-25E CAGR: 27%
11.5 12.0
4.5 10.6 12 18 5
4.4 4.5 4.5 4.5
8.0 4.2
4.0
3.0 8 12 3
5.4
1.5 4 6 2
1.9 1.3 2.4 3.1 3.8 4.6 6.2 4.6 6.2 11.3 14.6 18.3
0.0 0 0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E
Revenue EBITDA margin (RHS) Revenue EBITDA margin (RHS)
2 8
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12 July 2023 Amber Enterprises
Source: Company
Exhibit 13: AMBER’s increasing RAC and RAC Component market share
Source: Amber * company estimates # RAC components include sheet metal, injection molding, copper, heat exchangers, motors, PCBA and cross-flow fans ^ excl. GST
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12 July 2023 Amber Enterprises
Source: Company
Source: Company
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12 July 2023 Amber Enterprises
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12 July 2023 Amber Enterprises
Mobility division
• FY23 revenue up 46% YoY, EBITDA margin 23.4%.
• Strong order book (Rs 7bn+); Pantry systems for Vande Bharat Express started.
• Defense application business seeing robust growth.
• Expanding wallet share with existing customers.
Electronics division
• FY23 revenue up 82% YoY, EBITDA margin 4.5%.
• Wearable segment witnessing strong growth.
• Pilot lot of telecom product has started.
• Onboarded new customers in the wearable and telecom sectors.
• RAC-PCBA market share crosses 20% and is growing consistently.
Motor division
• FY23 revenue up 30% YoY, EBITDA margin 13.7%.
• Expanding BLDC motors in outdoor units, window ACs and commercial segments.
• In advanced stages to add marquee clients in exports.
• Developing motors for new applications.
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12 July 2023 Amber Enterprises
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FY25 capex at Chennai facility, and ~10x asset turnover provide strong headroom for
growth. Acquired marquee clients and projects in last six months should aid order
AVALON Sensex book and revenue build up. It aims to reduce the NWC days (148) by 10-15 on lower
inventory, and thereby improve cash flows.
Outlook and View: Post 14%/20%/66% CAGR in revenue/EBITDA/PAT over FY20-23,
we estimate 22%/24%/44% CAGR over FY23-25E, with ~250bps expansion in its RoIC
to 26% in FY25E. With a positive outlook, we initiate coverage on AVALON with a
BUY rating, and a target price of Rs 752, based on 40x FY25E EPS of Rs 19.
Investors are advised to refer disclosures made at the end of the research report.
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12 July 2023 Avalon Technologies
Story in charts
Exhibit 1: Revenue growth trend Exhibit 2: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
35.9 34.1 35.8 36.0 36.2
16 FY20-23 CAGR: 14% 14.2 40 34.0 15
FY23-25E CAGR: 22% 11.7
12 30 11
9.4 11.6 11.9 12.1 12.3
8.4 20 10.0 8
6.9 9.6
8 6.4
7.5 7.5 7.7
10 1.8 4
5.6
4
0 3.1 0
FY20 FY21 FY22 FY23 FY24E FY25E
0
FY20 FY21 FY22 FY23 FY24E FY25E Gross margin EBITDA margin (RHS) PAT margin (RHS)
148
7.7
138
7.5 7.5
133
127
FY23-25E CAGR: 24%
123
8
113
108
106
900 150
101
5.6
96
88
6
80
80
80
77
77
77
76
67
100
65
600 3.1
55
55
55
51
4
1.8
1,090
300 50
883
2
215
632
525
115
0 0 0
FY20 FY21 FY22 FY23 FY24E FY25E Debtor Days Inventory Days Creditor Days Net-WC Days
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
Exhibit 7: Revenue mix trend (segment-wise) Exhibit 8: Revenue mix trend (India & Overseas)
100% 7 7 7
11 9 8 100 6 3
8 8 7 7 7
8 7 11 11 11
75% 6 8 33 38 41
75 34
29 27 21 22 22
31
50% 50
18 20 25 26 26
16 60 64 62 59
25% 25
28 29 30 29 28 28
0
0% FY20 FY21 FY22 FY23
FY20 FY21 FY22 FY23 FY24E FY25E
U.S.A India Others
Industrial Clean Energy Mobility Communication Medical Others
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12 July 2023 Avalon Technologies
Source: Company
Source: Company
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12 July 2023 Avalon Technologies
Margin profile
Low High
Exhibit 12: High precision product offerings across industries, with long product development cycles
Source: Company
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12 July 2023 Avalon Technologies
Focus on fast growing India and US markets; relatively low concentration risk among peers
Exhibit 13: AVALON’s growth strategy
Source: Company
% of revenue 11 12 13 10
% of revenue 21 23 26 18
% of revenue 46 49 50 37
% of revenue 63 66 65 54
Source: Company
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12 July 2023 Avalon Technologies
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12 July 2023 Avalon Technologies
4QFY23 performance
• Revenue up 30% YoY, EBITDA expanded 388bps YoY to 15.1%, PAT up 113% YoY.
• Margin expanded on richer product mix; 12-13% margin sustainable in the long
term.
Capex
• FY24/FY25 capex at Rs 350mn/Rs 250mn, respectively, on Chennai facility; ~10x
asset turnover.
• Current capacity utilisation at ~60%; hence, 45% growth seems achievable.
• Over 70% of the company’s manufacturing capacity is located in India.
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12 July 2023 Avalon Technologies
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12 July 2023 Dixon Technologies
Story in charts
Exhibit 1: Revenue growth trend Exhibit 2: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
200 185.9 15 10
FY20-23 CAGR: 40% 12.3
FY23-25E CAGR: 23%
152.7 10.5
11 9.6 9.7 9.7 8
150 8.6
121.9
107.0 8 5
100 5.1
4.4 4.2 4.4 4.5
64.5 4 3.5 3
44.0 2.7 2.5 2.5 2.7
50 1.8 2.1
0 0
FY20 FY21 FY22 FY23 FY24E FY25E
0 Gross margin EBITDA margin (RHS) PAT margin (RHS)
FY20 FY21 FY22 FY23 FY24E FY25E
97
4.5 2.7 2.7 3
79
90
78
2.5 2.5
73
73
73
2.1
62
51
51
1.8
51
3.0 2 60
46
43
42
41
39
29
29
29
1.5 1 30
7
7
7
7
7
6
1.2 1.6 1.9 2.6 3.8 4.9
0
0.0 0
Debtor Days Inventory Days Creditor Days Net-WC Days
FY20 FY21 FY22 FY23 FY24E FY25E
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
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12 July 2023 Dixon Technologies
Exhibit 7: Revenue mix trend Exhibit 8: Consumer Electronics - Revenue, margin trend
100% (Rs bn) (%)
5 3 4 4 4 4
12 9 8 8 80 10
17 FY20-23 CAGR: 27%
26 7 9 9 9
75% 7 FY23-25E CAGR: 25%
9 60 8
35 36 36
50% 48
60 40 3.8 5
48 3.6
3.1
25% 2.4 2.7 2.4
43 43 44
29 20 3
12 13
0% 21.1 38.6 51.7 42.8 55.6 66.7
FY20 FY21 FY22 FY23 FY24E FY25E 0 0
Mobile & EMS Consumer Electronics Home Appliances FY20 FY21 FY22 FY23 FY24E FY25E
Exhibit 9: Lighting - Revenue, margin trend Exhibit 10: Home Appliances - Revenue, margin trend
(Rs bn) (%) (Rs bn) (%)
20 20 20 20
FY20-23 CAGR: -3% FY20-23 CAGR: 42%
FY23-25E CAGR: 15% FY23-25E CAGR: 20%
15 15 15 15
11.6
9.2 9.5 9.5 9.5
10 10 10 7.6 10
11.4 11.0 12.8 10.6 12.1 14.0 4.0 4.3 7.1 11.4 13.7 16.5
0 0 0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E
Revenue EBITDA margin (RHS) Revenue EBITDA margin (RHS)
Exhibit 11: Mobile & EMS - Revenue, margin trend Exhibit 12: Security System - Revenue, margin trend
(Rs bn) (%) (Rs bn) (%)
100 8 10.0 6
FY20-23 CAGR: 113% FY20-23 CAGR: 31%
FY23-25E CAGR: 25% FY23-25E CAGR: 20%
75 6 7.5 3.8 5
4.7 3.3 3.4
3.0 3.2
3.6 2.8
50 3.2 3.3 3.4 4 5.0 3
3.1
25 2 2.5 2
5.4 8.4 31.4 52.2 65.3 81.6 2.2 2.2 4.0 4.9 5.9 7.1
0 0 0.0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E
Revenue EBITDA margin (RHS) Revenue EBITDA margin (RHS)
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12 July 2023 Dixon Technologies
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12 July 2023 Dixon Technologies
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23
Consumer Electronics 21.0 38.4 51.6 42.8 55.6 66.7 2.4 2.7 2.4 3.1 3.6 3.8 46 168 213 89
Lighting 11.4 11.0 12.8 10.6 12.1 14.0 8.6 8.8 6.9 8.6 8.6 8.6 37 29 22 29
Home Appliances 4.0 4.3 7.1 11.4 13.7 16.5 11.6 9.2 7.6 9.5 9.5 9.5 30 21 18 30
Mobile & EMS 5.4 8.4 31.4 52.2 65.3 81.6 3.6 4.7 3.1 3.2 3.3 3.4 31 21 21 31
Security Systems 2.2 2.2 4.0 4.9 5.9 7.1 3.3 2.8 3.8 3.0 3.2 3.4 36 26 55 39
Source: Company, Systematix Institutional Research
2007 LCD TV
2021 IT hardware
2023 Refrigerators
Source: Company
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12 July 2023 Dixon Technologies
Exhibit 18: DIXON’s key customers across product segments
Products Key customers
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12 July 2023 Dixon Technologies
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12 July 2023 Elin Electronics
Story in charts
Exhibit 1: Segment-wise revenue mix
FY19 FY20 FY21 FY22 FY23 FY24E FY25E
Total revenue (Rs mn) 8,283 7,856 8,624 10,936 10,755 12,368 14,223
Revenue mix (%)
Lighting, Fans and Switches 38 37 30 30 33 33 33
Small Appliances 28 25 22 23 23 23 23
FHP Motor 12 15 21 22 18 18 18
Other EMS 2 4 3 3 3 3 3
Total EMS 80 81 77 78 78 78 78
Total Non-EMS 20 19 23 22 22 22 22
Source: Company
Exhibit 2: Revenue growth trend Exhibit 3: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
16 14.2
FY20-23 CAGR: 11% 35 29.5 10
12.4 27.6 25.9 26.9 27.1
FY23-25E CAGR: 15% 25.4
12 10.9 10.8 26 8
8.6 7.7 7.2 7.3 7.7
7.9 18 7.1 5
8 6.1
9 4.0 4.0 4.4 3
3.5 3.6
4 2.5
0 0
FY20 FY21 FY22 FY23 FY24E FY25E
0
Gross margin EBITDA margin (RHS) PAT margin (RHS)
FY20 FY21 FY22 FY23 FY24E FY25E
82
800 5 90
77
66
66
67
66
66
59
600 4.4 4 68
49
48
4.0 4.0
43
43
44
42
42
43
42
42
40
3.6
37
400 3.5 3 45
33
32
2.5
200 1 23
275 348 391 269 495 628
0 0 0
FY20 FY21 FY22 FY23 FY24E FY25E Debtor Days Inventory Days Creditor Days Net-WC Days
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
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12 July 2023 Elin Electronics
Leader in Small Appliances, FHP motors and domestic LED Lighting; high client concentration
Exhibit 8: ELIN – Key product segments and market positioning
Source: Company
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12 July 2023 Elin Electronics
Exhibit 10: ELIN - Revenue mix (%)
FY19 FY20 FY21 FY22 FY23
Lighting, Fans and Switches 38 37 30 30 33
Lighting 32 31 22 22 24
Flashlights 4 4 4 3 3
Fans 0 0 2 5 5
Switches 1 2 2 1 2
Small Appliances 28 25 22 23 23
Kitchen & Home Care 22 19 19 18 17
Personal Care 6 5 3 5 7
FHP Motor 12 15 21 22 18
Consumer Durables - - - 16 13
Fans - - - 5 3
Others - - - 1 2
Other EMS 2 4 3 3 3
Total EMS 80 81 77 78 78
Precision Components & Others 20 19 18 20 21
Medical Cartridges - 1 5 2 1
Total Non-EMS 20 19 23 22 22
Source: Company, Systematix Institutional Research
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12 July 2023 Elin Electronics
• Land & Building: would create additional space of ~45,000 sq.ft. at the company’s
Ghaziabad facility, and are expected to be completed by FY24 end.
• Plant & Machinery: new SMT lines (primarily for connected lighting), moulding
machines, motor assembly lines, new product-related machineries (trimmers,
heated hair-brush, AC ODU motor etc) are to be added.
• Electrical Installation: erecting a 33 kVA line at its Ghaziabad facility at a cost of
Rs 34 mn and PNG genset of Rs 23 mn - both are one-time capex.
• Tools, Dies & Moulds: represent tooling development for new products, viz.,
trimmers, AC ODU motors, TPW fans & LED lighting – most of these tooling
investments should generate revenues in FY24.
Exhibit 14: Key initiatives undertaken/to be taken
Description Status
• Has gone live from Jan 1, 2023
Introduction of SAP
• Expects to drive efficiencies in inventory reduction and manpower planning through real-time data availability
• Reduction in per unit electricity cost, resulting in savings of Rs 3 lakh per month
Installation of 33 KVA line at
• Since there is no load shedding, genset usage would reduce, resulting in savings of Rs 3 lakh per month in diesel
the Ghaziabad factory
• Uninterrupted power supply helps in higher throughput of plant & machinery
• Hired a process consultant for the Ghaziabad factory, with the aim to deliver ~3% savings in labour cost by Q4FY24
Streamlining labour cost
via streamlining processes to reduce headcount and achieve some degree of automation
ODM revenue growth • Hired an ODM design & development head; design work on ODM models for Small Appliances has begun
Hiring key people • Hiring of a sales & marketing head in process
Source: Company
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12 July 2023 Elin Electronics
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12 July 2023 Elin Electronics
FY23 performance
• Revenue down 2% YoY, adj. EBITDA margin 7%, PAT down 32% YoY, 2.5% margin.
• Q4FY23 was a weak quarter as revenue fell 15% YoY; EBITDA margin contracted
~400bps to 3.3%; certain one-offs and non-recurring charges too had a bearing on
margins.
• New product launches (TPW fans and BLDC fans) were delayed from Q4FY23 to
Q1FY24.
• ELIN’s focus on the premium segment impacted its performance in small
appliances, as consumers downgraded to more affordable products amid weak
sentiment.
• Capex: Rs 524mn.
New products
• Targeting Havells, Crompton, Bajaj, Usha, and Philips for oil filled radiator (OFR)
heaters; Bajaj and Philips for ovens.
• Venturing into the AC market, with suppliers of ODU motor expected in Q2FY24.
• Sale of chimney motors could increase once customs duty is raised from 7.5% to
15% in the forthcoming budget.
• Exploring export opportunities for low-cost downlights and panels to Signify in
Europe and the US.
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12 July 2023 Elin Electronics
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12 July 2023 IKIO Lighting
Story in charts
Exhibit 2: Revenue growth trend Exhibit 3: Gross, EBITDA and PAT margin trend
(Rs mn) (%) (%)
50 23.3 25
5.0 22.4 22.3
FY20-23E CAGR: 26% 4.4
36.8
38 43.6 42.1 19
3.8 3.3 38.5
16.9
25 15.2 15.6 13
2.5 2.2 2.1 13.5
13 9.7 6
1.3
0 0
FY20 FY21 FY22 FY23E
0.0
FY20 FY21 FY22 FY23E Gross margin EBITDA margin (RHS) PAT margin (RHS)
157
FY20-23E CAGR: 47% 15.6 180
15.2
140
13.5
121
115
563 14 135
104
99
9.7
375 9 90
62
61
61
57
56
54
49
40
26
26
188 5 45
48 42 41 1.3
40 39 1.5
1.2
1.0
35 41
38 38 37 1.0 0.8
23
0.5
10
FY20 FY21 FY22 FY23E
0.0
ROE ROIC FY20 FY21 FY22 FY23E
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12 July 2023 IKIO Lighting
IKIO Lighting
Holding Company Limited
50%
85 87 87 86
25%
0%
FY20 FY21 FY22 FY23E
LED lighting Other products Refrigeration lights ABS piping
Source: Company, Systematix Institutional Research
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12 July 2023 IKIO Lighting
ABS piping: Commenced business in FY22; key customers include, RLux RV LLC and Znergy Inc., who supply to Forest River Inc. (a
subsidiary of Berkshire Hathaway)
Refrigerator LED lighting: Commenced business in FY16; key customers include, Voltas, Frigoglass India and Western refrigeration
Other products: Manufactures and assembles fan regulators, switch products, light strips, mouldings and fittings, etc.
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12 July 2023 IKIO Lighting
Lighting solution
• Focus on high-end and decorative lighting space, and not just bulbs and battens.
• Giving LED solutions to retail stores since 2014.
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12 July 2023 IKIO Lighting
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FY23 revenue), Rs 2.2bn capex in FY24 (to triple capacity) and ~5x asset turnover
provide robust outlook on growth, and we estimate RoE/RoCE of 20/25% for
KAYNES Sensex
KAYNES. Likely reduction in NWC days (99 currently) could boost cash flows.
Outlook and View: Post 45%/60%/116% CAGR in revenue/EBITDA/PAT over FY20-23,
we estimate 32%/34%/40% CAGR over FY23-25E, with healthy 26% RoIC despite high
capex. With a positive outlook, we initiate coverage on KAYNES with a BUY rating
and a target price of Rs 1,930, based on 60x FY25E EPS of Rs 32.
Investors are advised to refer disclosures made at the end of the research report.
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12 July 2023 Kaynes Technology
Story in charts
Exhibit 1: Revenue growth trend Exhibit 2: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
22 19.8 40 34 40
FY20-23 CAGR: 45% 32 31 31 31 31
FY23-25E CAGR: 32% 15.2 30 30
17
11.3 20 15 15 15 20
13
11 11 10
7.1
10 10
3.7 4.2 3 2
6 9 9
6 8
0 0
FY20 FY21 FY22 FY23 FY24E FY25E
0
FY20 FY21 FY22 FY23 FY24E FY25E Gross margin EBITDA margin (RHS) PAT margin (RHS)
165
(%)
151
150
2,000 13 180
142
135
134
134
FY20-23 CAGR: 116% 9.5 9.5
117
114
114
8.5
109
108
10
106
FY23-25E CAGR: 40%
102
1,500 135
93
91
85
83
5.9 8
74
73
72
72
72
72
1,000 90
5
2.6 2.2
500 45
3
95 94 417 952 1,440 1,870
0 0 0
FY20 FY21 FY22 FY23 FY24E FY25E Debtor Days Inventory Days Creditor Days Net-WC Days
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
38 32 1.4
26 27 26 1.8 1.0
25 0.8
25
12 0.5 (0.2) (0.1)
(0.3)
13 21
13 14 (0.8)
0 9 10
7
FY20 FY21 FY22 FY23 FY24E FY25E (2.0)
ROE ROIC FY20 FY21 FY22 FY23 FY24E FY25E
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12 July 2023 Kaynes Technology
Source: Company * PCB/PCBA/Box build content mix is highest in IoI/IT (40-50%) followed by Telecom (~30%), Industrial (20-30%) and Aerospace/defense (15-25%)
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12 July 2023 Kaynes Technology
Exhibit 12: KAYNES - leading ESDM player with end-to-end Design & Engineering capabilities…
Source: Company
Exhibit 13: Internationally certified manufacturing facilities backed by a strong supply chain
Source: Company
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12 July 2023 Kaynes Technology
Long standing relationship with marquee customers; benefitting from strong industry tailwinds
Exhibit 14: Marquee customer base
Source: Company
Source: Company
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12 July 2023 Kaynes Technology
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12 July 2023 Kaynes Technology
FY23 performance
• Revenue mix (FY23): Auto (38%), Industrial (27%), Railway (12%), Consumer (9%).
• Missed some revenue and profits on FY23 guidance given earlier, due to shortage
of chip components.
• Net debt reduced by Rs 1bn to Rs 474mn during FY23 aided by IPO proceeds.
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12 July 2023 Kaynes Technology
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could limit overall margins. PGEL intends to incur Rs 1.8bn capex (funded via internal
accruals) on its new integrated manufacturing unit in Rajasthan for RACs (to double
PG ELEC Sensex
capacity) and on a new building and Surface Mount Technology (SMT) lines in Supa
(Maharashtra). PLI benefit of Rs 150mn is expected in FY24. Asset turnover is likely to
rise to 5-6x in FY25 vs. ~4x now.
Outlook and View: Post 50%/64%/209% CAGR in revenue/EBITDA/PAT over FY20-23,
we estimate 28%/28%/33% CAGR over FY23-25E. RoIC is likely to expand to ~19% in
FY25E from 9.6% currently. With a positive outlook, we initiate coverage on PGEL
with a BUY rating, and a target price of Rs 1,806, based on 28x FY25E EPS of Rs 64.
Investors are advised to refer disclosures made at the end of the research report.
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12 July 2023 PG Electroplast
Story in charts
Exhibit 1: Revenue growth trend Exhibit 2: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
40 35.1 25 21.2 20.9 10
FY20-23 CAGR: 50% 19.5 8.2 8.2 8.2
FY23-25E CAGR: 28% 28.0
30 19 8
21.6 7.1 18.3 18.3 18.3
13 6.8 5
6.2
20
11.0 6 3.6 3.9 3
0.4 3.4 3.5
10 6.4 7.0
0 1.7 0
FY20 FY21 FY22 FY23 FY24E FY25E
0
FY20 FY21 FY22 FY23 FY24E FY25E Gross margin EBITDA margin (RHS) PAT margin (RHS)
95
90
1,125 3 101
80
77
76
74
72
71
70
1.7
68
66
66
66
64
61
60
60
58
58
56
48
48
750 2 68
45
45
0.4
375 0 34
26 116 374 775 994 1,369
0 (2) 0
FY20 FY21 FY22 FY23 FY24E FY25E Debtor Days Inventory Days Creditor Days Net-WC Days
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
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12 July 2023 PG Electroplast
Fast growing into product vertical (RAC, Washing Machine, Cooler etc.); focus on ODM, cash flow
Exhibit 9: PGEL – Business verticals
Source: Company
Source: Company
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12 July 2023 PG Electroplast
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12 July 2023 PG Electroplast
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12 July 2023 PG Electroplast
PG ELECTROPLAST (FINANCIALS)
Profit & Loss Statement Balance Sheet
YE: Mar (Rs mn) FY21 FY22 FY23 FY24E FY25E YE: Mar (Rs mn) FY21 FY22 FY23 FY24E FY25E
Net revenues 7,032 10,977 21,599 28,020 35,136 Share capital 197 212 227 227 227
Growth (%) 10.0 56.1 96.8 29.7 25.4 Net worth 1,925 3,123 3,959 4,949 6,308
Raw material expenses 5,565 8,840 17,645 22,890 28,703 Total debt 1,833 3,839 5,425 6,425 6,925
Gross Margin (%) 20.9 19.5 18.3 18.3 18.3 Minority interest - - - - -
Employee & Other exp. 969 1,392 2,194 2,846 3,569 DT Liability/ (Asset) 49 166 366 386 406
EBITDA 498 745 1,760 2,284 2,864 Capital Employed 3,807 7,127 9,751 11,760 13,640
EBITDA margins (%) 7.1 6.8 8.2 8.2 8.2 Net tangible assets 2,726 4,403 5,766 7,112 7,768
Depreciation 180 221 350 453 545 Net Intangible assets 6 7 12 12 12
Other income 26 182 44 28 70 Goodwill - - - - -
Finance costs 184 225 479 568 612 CWIP 60 49 20 20 20
PBT 151 491 975 1,291 1,777 Investments (Strategic) 2 7 22 22 22
Effective tax rate (%) 23.1 23.7 20.6 23.0 23.0 Investments (Financial) - - - - -
Associates/(Minorities) - - - - - Current Assets 2,827 5,828 8,866 10,950 13,132
Net Income 116 374 775 994 1,369 Cash 174 392 396 164 521
Adjusted net income 116 374 775 994 1,369 Current Liabilities 1,987 3,558 5,331 6,520 7,835
Shares outstanding 20 21 23 23 23 Working capital 840 2,270 3,535 4,430 5,297
FDEPS (Rs) 5.5 17.6 36.5 46.8 64.5 Capital Deployed 3,807 7,127 9,751 11,760 13,640
FDEPS growth (%) 344.4 222.1 107.0 28.3 37.7 Contingent Liabilities 77 1,815 - - -
Source: Company, Systematix Institutional Research Source: Company, Systematix Institutional Research
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Systematix
Institutional Equities
Oct-22
Jan-23
Apr-23
Feb-23
Jul-23
Nov-22
May-23
in asset turnover (<2x in FY23), backed by ramp up at new capacities and better NWC
days (90 days in FY23) could boost its current subpar return ratios. It aims to incur a
SYRMA Sensex
capex of over Rs 2bn in FY24, with an asset turnover of ~6x.
Outlook and View: Post 33%/11%/11% CAGR in revenue/EBITDA/ PAT over FY20-23,
we estimate 32%/38%/44% CAGR over FY23-25E with RoE and RoIC expanding
~550bps to ~13% and 21%, respectively, in FY25E. With a positive outlook, we initiate
coverage on SYRMA with a BUY rating, and a target price of Rs 560, based on 40x
FY25E EPS of Rs 14.
Investors are advised to refer disclosures made at the end of the research report.
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12 July 2023 Syrma SGS Technology
Story in charts
Exhibit 1: Revenue growth trend Exhibit 2: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
40 40 36.0 25
FY20-23 CAGR: 33% 35.9
32.6
FY23-25E CAGR: 32% 29.6
27.7 30 15.8 24.8 24.9 25.0 19
30
11.3
20.5 20 9.9 9.6 10.0 13
9.2
20
12.7 10.2
10 6
8.7 8.9 7.1 6.6 6.9
10 5.7 5.8
0 0
FY20 FY21 FY22 FY23 FY24E FY25E
0
Gross margin EBITDA margin (RHS) PAT margin (RHS)
FY20 FY21 FY22 FY23 FY24E FY25E
105
FY23-25E CAGR: 44%
95
93
90
90
2,100 9
87
87
87
101 86
84
81
80
7.1 78
78
6.9
76
75
74
73
6.6 72
72
72
69
5.8
63
5.7
60
1,400 6 68
700 3 34
1,193
1,813
2,474
884
630
722
0
0 0
Debtor Days Inventory Days Creditor Days Net-WC Days
FY20 FY21 FY22 FY23 FY24E FY25E
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
21 0.3
23
18 18 0.25 0.1
16 16 0.1
19 0.0
15 (0.1)
0.00
13 (0.1)
12 13
8 11
8 (0.25)
0
FY20 FY21 FY22 FY23 FY24E FY25E
(0.50)
ROE ROIC FY20 FY21 FY22 FY23 FY24E FY25E
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12 July 2023 Syrma SGS Technology
Exhibit 7: Revenue mix (segment-wise) Exhibit 8: Automotive - Revenue, margin trend
(Rs bn) (%)
100%
14 13 8 8 8 10 28
24 9 9 9 FY20-23 CAGR: 45%
4 12 FY23-25E CAGR: 32%
75% 15 20 20 20
15 8 22.7 21
20 22.1 22.5
20.4
50% 18.4
44 31 31 31 5 14
38
35
12.5
25% 3 7
32 32 32
22 23 20 1.3 1.3 2.5 4.0 5.4 7.1
0% 0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E
Consumer Industrials Auto IT & Railways Healthcare Revenue Gross margin (RHS)
Exhibit 9: Consumer - Revenue, margin trend Exhibit 10: Healthcare - Revenue, margin trend
(Rs bn) (%) (Rs mn) (%)
14 53.0 FY20-23 CAGR: 50% 60 3,000 FY20-23 CAGR: -8% 60
FY23-25E CAGR: 32% FY23-25E CAGR: 32%
41.9 53.9 54.3 54.5
11 38.1 45 2,250 45
48.5
38.7 37.2
7 30 1,500 30
17.1 17.5 17.7
4 15 750 15
2,067
1,244
1,619
1,633
2,205
2,866
1.9 2.1 2.6 6.6 8.9 11.6
0 0 0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E
Revenue Gross margin (RHS) Revenue Gross margin (RHS)
Exhibit 11: Industrials - Revenue, margin trend Exhibit 12: IT & Railways - Revenue, margin trend
(Rs bn) (%) (Rs mn) (%)
14 FY20-23 CAGR: 25% 40 3,600 18
FY23-25E CAGR: 32% FY20-23 CAGR: 321%
14.5 FY23-25E CAGR: 32%
11 35.3 30 2,700 14
30.6 31.4 30.3 30.5 9.8 10.2 10.4
29.9
7 20 1,800 7.7 9
5.3
4 10 900 5
1,543
1,803
2,434
3,164
314
24
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12 July 2023 Syrma SGS Technology
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12 July 2023 Syrma SGS Technology
Segmental performance; high growth across automotive, consumer and industrial verticals
Exhibit 16: Automotive & EV vertical
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12 July 2023 Syrma SGS Technology
Exhibit 19: Healthcare vertical
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12 July 2023 Syrma SGS Technology
2018 Set up our ‘zone of autonomous creation’ to support the provision of rapid prototyping service
2020 Investment in our Company by South Asia Growth Fund II Holdings LLC and South Asia EBT Trust
2021 Acquired 75% of the issued and paid up share capital of Perfect ID India Private Limited
Source: Company, Systematix Institutional Research
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12 July 2023 Syrma SGS Technology
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12 July 2023 Syrma SGS Technology
FY23 performance
• Revenue mix: ODM (18%), Box build (18.5%), PCBA (18%).
• Exports contributed 31% to revenue. Momentum is likely to sustain.
• Added around 10 marquee customers (domestic and global).
Guidance
• Mid-term guidance: 40% revenue CAGR, in line with the industry; double-digit
EBITDA margin, driven by industry tailwinds and new customer additions.
• Order book: Rs 30bn (primarily in automobiles and consumers); 70% executable
in FY24 and the rest in FY25.
• NWC days likely to reduce by 10 days from 89 days at FY23 (72-day average).
• Capex of over Rs 2bn in FY24; asset turnover should be ~6x.
Business dynamics
• Consumer division: While ODM is a high-margin model, OEM is a low margin but
large volume business, which generates healthy cash flows due to low working
capital needs; Backward integration could aid margins in both areas.
• Healthcare: Saw slow rebound in FY23; revival may take 1-2 quarters more, but
could surprise once it happens
• Railways: RDSO approval will likely provide a huge opportunity.
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12 July 2023 India EMS Industry
DISCLOSURES/APPENDIX
I. ANALYST CERTIFICATION
I, Ashish Poddar, Pranay Shah, Shraddha Kapadia; hereby certify that (1) views expressed in this research report accurately reflect my/our personal views about any or all of the subject
securities or issuers referred to in this research report, (2) no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed in this research report by Systematix Shares and Stocks (India) Limited (SSSIL) or its group/associate companies, (3) reasonable care is taken to achieve and maintain
independence and objectivity in making any recommendations.
II. ISSUER SPECIFIC REGULATORY DISCLOSURES, unless specifically mentioned in point no. 9 below:
1. The research analyst(s), SSSIL, associates or relatives do not have any financial interest in the company(ies) covered in this report.
2. The research analyst(s), SSSIL, associates or relatives collectively do not hold more than 1% of the securities of the company(ies) covered in this report as of the end of the
month immediately preceding the distribution of the research report.
3. The research analyst(s), SSSIL, associates or relatives did not have any other material conflict of interest at the time of publication of this research report.
4. The research analyst, SSSIL and its associates have not received compensation for investment banking or merchant banking or brokerage services or any other products or
services from the company(ies) covered in this report in the past twelve months.
5. The research analyst, SSSIL or its associates have not managed or co-managed a private or public offering of securities for the company(ies) covered in this report in the previous
twelve months.
6. SSSIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party in connection with this research
report.
7. The research analyst has not served as an officer, director or employee of the company(ies) covered in this research report.
8. The research analyst and SSSIL have not been engaged in market making activity for the company(ies) covered in this research report.
9. Details of SSSIL, research analyst and its associates pertaining to the companies covered in this research report:
Sr. Yes /
Particulars
No. No.
1 Whether compensation was received from the company(ies) covered in the research report in the past 12 months for investment banking transaction by SSSIL. No
2 Whether research analyst, SSSIL or its associates and relatives collectively hold more than 1% of the company(ies) covered in the research report. No
3 Whether compensation has been received by SSSIL or its associates from the company(ies) covered in the research report. No
Whether SSSIL or its affiliates have managed or co-managed a private or public offering of securities for the company(ies) covered in the research report in the
4 No
previous twelve months.
Whether research analyst, SSSIL or associates have received compensation for investment banking or merchant banking or brokerage services or any other
5 No
products or services from the company(ies) covered in the research report in the last twelve months.
10. There is no material disciplinary action taken by any regulatory authority that impacts the equity research analysis activities.
STOCK RATINGS
BUY (B): The stock's total return is expected to exceed 15% over the next 12 months.
HOLD (H): The stock's total return is expected to be within -15% to +15% over the next 12 months.
SELL (S): The stock's total return is expected to give negative returns of more than 15% over the next 12 months.
NOT RATED (NR): The analyst has no recommendation on the stock under review.
INDUSTRY VIEWS
ATTRACTIVE (AT): Fundamentals/valuations of the sector are expected to be attractive over the next 12-18 months.
NEUTRAL (NL): Fundamentals/valuations of the sector are expected to neither improve nor deteriorate over the next 12-18 months.
CAUTIOUS (CS): Fundamentals/valuations of the sector are expected to deteriorate over the next 12-18 months.
III. DISCLAIMER
The information and opinions contained herein have been compiled or arrived at based on the information obtained in good faith from sources believed to be reliable. Such information
has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy completeness or correctness.
This document is for information purposes only. This report is based on information that we consider reliable; we do not represent that it is accurate or complete and one should exercise
due caution while acting on it. Description of any company(ies) or its/their securities mentioned herein are not complete and this document is not and should not be construed as an
offer or solicitation of an offer to buy or sell any securities or other financial instruments. Past performance is not a guide for future performance, future returns are not guaranteed and
a loss of original capital may occur. All opinions, projections and estimates constitute the judgment of the author as on the date of the report and these, plus any other information
contained in the report, are subject to change without notice. Prices and availability of financial instruments are also subject to change without notice. This report is intended for
distribution to institutional investors.
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locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject to SSSIL or
its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently sent or has reached any individual in such country, especially USA, the same
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12 July 2023 India EMS Industry
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is prohibited by law and will result in prosecution. The information contained in the report is intended solely for the recipient and may not be further distributed by the recipient to any
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SSSIL generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any
companies that the analysts cover. Additionally, SSSIL generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of
any companies that they cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that
reflect opinions that are contrary to the opinions expressed herein. Our proprietary trading and investing businesses may make investment decisions that are inconsistent with the
recommendations expressed herein. The views expressed in this research report reflect the personal views of the analyst(s) about the subject securities or issues and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The
compensation of the analyst who prepared this document is determined exclusively by SSSIL; however, compensation may relate to the revenues of the Systematix Group as a whole, of
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derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. SSSIL, its directors, analysts
or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on the basis of this report
including but not restricted to fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc.
SSSIL and its affiliates, officers, directors, and employees subject to the information given in the disclosures may: (a) from time to time, have long or short positions in, and buy or sell, the
securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation (financial interest)
or act as a market maker in the financial instruments of the company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential material
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SSSIL, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness,
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SSSIL will not be liable for any delay or any other interruption which may occur in presenting the data due to any technical glitch to present the data. In no event shall SSSIL be liable for
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SSSIL or any of its other group companies or associates will not be responsible for any decisions taken on the basis of this report. Investors are advised to consult their investment
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