Fundamental Analysis by Dixon Technologies

Fundamental Analysis by Dixon Technologies: Have you heard of Foxconn making iPhones for Apple since 2007? Well, it’s a contract manufacturer. Based in China, it is one of the largest smartphone makers in the world.

Contract manufacturing is a booming industry. Many companies like Apple have the resources to manufacture their phones or gadgets. But they are asking for or awarding contracts to other companies to do so. why? you might ask. Well, outsourcing this job helps them focus on their strengths.

In this case, contract manufacturing helps Apple focus on innovation and customer experience, while manufacturing is outsourced to Foxconn.

In this article, we will look at a similar Indian company. After a six-fold jump in two and a half years, it’s highly rated! We will do a basic analysis of Dixon Technologies, the brand behind the brands. We’ll take a look at its business, clients, financials, and more. Let’s start, shall we?

Dixon Technologies Fundamental Analysis – An Overview

About company

Fundamental analysis of Dixon Technologies - The Company

Dixon Technologies is a contract manufacturer. The company has been a pioneer in the field of Electronic Manufacturing Services (EMS) in India for years. It provides manufacturing and design-focused solutions in consumer durables, home appliances, lighting, mobile phones, security devices, set-top boxes, wearables, and medical equipment.

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In addition, it provides repair and refurbishment services for LED TV panels.

Industry overview

India’s factory-to-world ambitions are being reinforced as China threatens to withdraw from the West. The reason for optimism is rooted in geopolitics. Multinational corporations need a backup site for making tools. Well, India has a deep labor pool, which may work in favor of China’s +1 strategy.

Total addressable EMS market in India was valued at ₹2,654 billion (US$36 billion) in FY21 and is expected to grow to ₹9,963 billion (US$135 billion) in FY26 at a CAGR amount of 30%. However, the shareholding of Indian EMS companies is around 40%, which is valued at 1,069 billion rubles (14 billion USD) in FY21, which is expected to grow by 41% at a CAGR of 5978 billion (US$5978 billion). 81 billion USD) by FY26.

Fundamental Analysis of Dixon Technologies – Business Overview

So far in the article on fundamental analysis of Dixon Technologies, we’ve taken a look at what Dixon Technologies does and an overview of the industry. We will now take a look at its customers, manufacturing facilities and business divisions.

customers

Leading global and local brands make up this company’s homegrown clientele. It is the largest LED TV manufacturer in India for clients like Samsung, Panasonic, Xiaomi, TCL, OnePlus, and more. Moreover, it produces lighting products for companies like Philips, Havells, Syska, Bajaj, Wipro, and Orient.

Moreover, it manufactures semi-automatic washing machines for Godrej, Samsung, Lloyd and Panasonic.

manufacturing and research and development facilities

Dixon Technologies has 18 state-of-the-art manufacturing facilities located in Uttar Pradesh, Uttarakhand and Andhra Pradesh. It has been certified with ISO 9001-2015, ISO 14001-2015 and 45001:2018 quality certification.

In addition, Dixon Technologies is eligible for Indian government subsidies under five different production-related incentive programs. Moreover, they have 6 research and development (R&D) centers in India and China.

PLI scheme

Dixon is proud to be approved under 5 PLI schemes such as lighting, mobile, IT equipment, air conditioners, wearables and wearables. Moreover, its budget is about 409 billion Russian rubles, under mobile manufacturing and specified electronic components, which is much more than any other scheme.

The PLI scheme provides a financial incentive to stimulate domestic production and attract significant investment in the value chain. This plan encourages businesses to utilize existing installed capacity to meet the growing demand for homes.

Business sectors

Founded in 1993, Dixon has now expanded its operations to include various sub-sectors of electronics. It operates as an Original Equipment Manufacturer (OEM) as well as an Original Design Manufacturer (ODM).

Dixon simply does what its customers demand under the OEM model. OEMs source components and materials to assemble finished product based on customer specifications. Customers decide how the final product will look and function. Dixon makes most of its money by being an OEM.

As an ODM company, Dixon Technologies can show off its creativity. ODM develops ideas, product design from scratch, and raw material selection. In fact, they can also change the technical specifications. This model helps them, or any other ODM to earn better margins.

Cellphones

Dixon Technologies is one of the fastest growing mobile phone manufacturers in India. They are establishing in-house capabilities to manufacture key components including sheet metal, plastic parts, batteries and inverters.

Security monitoring system

This division is a joint venture between Dixon and Aditya Infotech Limited. They manufacture security devices under the brand name AIL Dixon Technologies Private Limited (“ADTPL”). They offer high quality products with minimum lead time.

reverse logistics

Within two years, it established the leadership of PAN India. It is among the few companies that have a panel repair facility in India. This part trains professionals. Moreover, it offers services to repair and refurbish many products such as set-top boxes, LED TVs, cell phones, security cameras, modems, and computer peripherals.

medical electronics

Dixon Technologies entered into the manufacture of diagnostic test machines in 2020. It has signed a Memorandum of Understanding with Molbio to manufacture Truelab ™ Quattro Real Time Quantitative Micro PCR analysis machines. These machines can perform 190-200 tests per day for infectious diseases including Covid-19.

set-top boxes

The company manufactures set-top boxes for leading DTH operators. He sees strong growth opportunities in this sector.

Electronics consumers

They provide exemplary, innovative and tailor-made consumer electronics. These are top notch, flawless, cost effective and suit the modern taste and preferences of our customers all over the world.

Appliances

Dixon Technologies has in-house facilities to create solutions that have state-of-the-art, novel features including Magic Filter, Waterfall, Side Scrubber and Air Drying. They design, manufacture and test a wide range of washing machines. Revenue from this segment is entirely based on the ODM model.

lighting solutions

They design and manufacture LED lighting solutions ranging from 0.5W to 100W. This includes the main electronic board design, its mechanical design, light sources, and enclosure design. In fact, they have in-house capabilities to manufacture key inputs such as sheet metal, plastic molding, and wound components. This enabled them to emerge as an ODM player in India.

competitors and moat

Some of Dixon Technologies’ major competitors are Honeywell Automation, CWD, Mirc Electronics, and Wonder Fibromats. The following are some of the factors that give Dixon Technologies a competitive advantage:

  • Comprehensive solutions and underdeveloped campuses.
  • Approval under 5 PLI schemes
  • Diverse product portfolio
  • Wide range of local and international clients
  • In-house casting facility
  • Complete cleanroom technology
  • High speed SMT lines

Revenue and profitability

Fundamental Analysis Dixon Technologies - Financial
year Revenue (₹ in CR) net profit (₹ in Cr)
2018 2841 60
2019 2984 63
2020 4400 120
2021 6448 159
2022 10697 190

Revenue as well as Dixon Technologies net profit is showing an increasing trend. This is fine for consolidated as well as standalone numbers. The company achieved a 3-year compound annual growth rate sales growth of 89.32% and a 3-year compound annual growth rate net profit growth of 73.35%, indicating that it has achieved good growth.

The company’s performance in the September quarter (Q2FY23) was better than expected. The mobile and home appliances segments drove sales growth higher. Analysts say the margin expansion in the long term will be led by backward integration and an increasing share of ODM revenue.

Profit margin

year operating margin (%) net profit margin (%)
March 2018 4.29 2.57
March 2019 4.29 2.23
March 2020 4.83 3.01
March 2021 4.08 2.67
March 2022 3.08 2.01

Dixon Technologies had poor profit margins in fiscal ’22. In fact, they fell due to an inflationary environment that drove up the cost of raw materials.

Debt and return ratios

year RoE (%) RoCE (%) return on assets (%)
March 2018 19.33 30.54 6.30
March 2019 16.75 21.09 4.24
March 2020 22.25 28.90 7.09
March 2021 21.67 25.07 5.61
March 2022 19.07 19.39 4.44

The company’s debt has increased over a period of five years. However, the ideal debt-to-equity ratio is 0.46. The company has an optimal return on equity. However, its return on capital employed and return on assets were less than the ideal requirement.

Input

The promoters own 34.27% of the company. Fisheries companies own 16.27%, direct investment companies own 18.59% and the public owns 30.87% of the company. There is no pledge on the lawns which is a good sign.

A few notable DIIs that hold a stake in the company are Life Insurance Corporation of India (5.75%), ICICI Prudential Life Insurance Company (2.36%), NipponLife India Trustee Ltd- A/C Nippon India RET (1.88%), DSP Equity and Fund Bonds (1.01%).

Key metrics

details Values details Values
face value ($) 2 return on equity (%) 19.07
Market value (Cr) 26903 net profit margin 1.77
EPS ($) 39.15 current ratio 1.15
Earnings per share (TTM) 115.8 debt to equity 0.46
Profitable return (%) 0.04 Promoter holdings (%) 34.27

in conclusion

In this article, we’ve looked at fundamental analysis of Dixon Technologies. We’ve gone through the industry it operates in, an overview of its business, and its moat. Then we took a look at its financials like revenue, profitability, ratios, and contribution. That’s all for this article, guys. We hope to see you around. Happy investment until next time!

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