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  • 28 Jul 2022
  • ICICIdirect Research

STRONG REVENUE GROWTH, RISE IN MARGINS LED BY PRICE HIKES

DIXON - 17529 Change: 14.50 (0.08 %)

News: Dixon Technologies Q1FY23 revenue came in at Rs 2855 crore up by 53% YoY. The consumer electronics division of the company reported revenues of Rs 932 crore (32 % of topline), a decrease of 26 % YoY due to a higher base and adverse product mix. Other segments, including Mobile & EMS and home appliances, saw a revenue growth of 4x and 3x, respectively, to Rs 1305 crore and Rs 256 crore YoY, on a lower base and client additions. In addition, lighting product revenue increased by 51% YoY to Rs 231 crore. Price increases led to a 170 bps increase in gross margin YoY. However, a one-time forex loss of Rs 12 crore kept the EBITDA margin growth at 95 bps YoY to 3.5%. The PAT came in at Rs 46 crore, up 150 % YoY in Q1FY23, primarily due to sales growth and EBITDA margin expansion.

Views: The Mobile & EMS and Home appliances divisions were the main drivers of Dixon's greater topline growth; however, the consumer electronics segment's revenue was negatively impacted by higher base and an unfavourable product mix. Going forward, management anticipates a significant recovery in the segment driven by client acquisitions. On the mobile front, the management has retained its FY23 revenue target of Rs 6500 core (Jump of 2x over FY22) driven by client addition, despite a slowdown in demand. The ease in raw material prices (which will benefit the company's ODM business) and increased operating leverage are likely to support an increase in EBITDA margin in the upcoming quarters.

Impact: Positive.