Local dominance, global ambition

Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited

KEY DATA

Rating BUY Sector relative Outperformer Price (INR) 4,612 12 month price target (INR) 5,700 Market cap (INR bn/USD bn) 270/3.6 Free float/Foreign ownership (%) 60.9/4.0

INVESTMENT METRICS

Local dominance, global ambition

Dixon is India’s largest listed electronics/durables manufacturer with a scalable business model delivering healthy returns underpinned by low cost-capital intensity and prudently diverse revenue streams.

Our key arguments: i) Dixon is an amplified play on India’s EMS growth given potential for higher concentration in sourcing as supply chains

localise. ii) Penetration in global supply chain would extend its earnings super-cycle with robust returns/cash flow. All in all, we are initiating with ‘BUY’ modelling in a 77/60% EPS CAGR (2/4Y), implying a modest double-digit revenue market share backed by solid competitive edge vis-a-vis peers. Slowdown in domestic market and limited global ramp-up pose key risks to our hypothesis.

FINANCIALS (INR mn)

Year to March FY21A FY22E FY23E FY24E

Revenue 64,482 1,29,380 1,90,344 2,62,514

EBITDA 2,866 5,312 8,202 11,811

Adjusted profit 1,598 3,145 5,002 7,404

Diluted EPS (INR) 26.9 52.9 84.1 124.5

EPS growth (%) 30.8 96.8 59.1 48.0

RoAE (%) 25.0 35.5 39.4 40.5

P/E (x) 171.6 87.2 54.8 37.0

EV/EBITDA (x) 94.7 51.0 32.8 22.5

Dividend yield (%) 0 0.1 0.1 0.3

PRICE PERFORMANCE

Best play on domestic CD growth; decade-long growth super-cycle

Dixon’s business model is highly fungible across products with low-cost-capital

intensity. This makes it the best play on expanding domestic electronic/durable

manufacturing pie as supply chain gets local. Additionally, breaking into global

supply-chain with a judicious business mix offers a longer growth super-cycle with

healthy returns. Our FY21–25E EPS CAGR of 60% reflects Dixon’s ramp-up in

domestic market share given its scale-cost edge. Our deep-dive into global EMS

majors (our case study) suggests the best phase of value creation for Dixon is yet to

come—and will possibly be far better given growth/return gap. Global markets

penetration would drive high growth over the decade with domestic leading upfront.

Domestic TAM to grow 3x to USD50bn; translation key

Dixon is the best proxy for PLI-led globally compatible capacity creation in

EMS/durables in our view. Given its highly competitive and scalable business model,

we clearly see a growing concentration of production mandates. Dixon’s

smart/judicious approach to global markets should keep growth/returns higher than

global peers. Though mature-stage returns for a global business could wane, we

argue that would be much later. Train attention on a 3x estimated jump in Dixon’s

TAM to ~USD50bn over FY21–25E; factoring in global potential makes it ~USD180bn.

Explore:

Outlook and valuation: Global-scale champion; initiate with ‘BUY’

Primarily a play on India’s expanding consumer durable/electronics manufacturing,

Dixon is yet to see a longer yet robust earnings super phase in our view. Additionally,

breaking into global supply chain could yield consistent high returns – in contrast to

peers – led by a judicious revenue mix and efficiency. That said, we admit that a

global business at a matured stage could face risks of lower valuations, if Dixon fails

to sustain its superior returns structure.

We are initiating coverage with ‘BUY/SO’ and TP of INR5,700 (40x PE on discounted

FY25E EPS, in line with CD sector) given strong earnings-return scale-up trajectory

and an expanding TAM basket with a comprehensive product basket. Key

risks/concerns: Slow and limited global mandates and ramp-up, slowdown in

domestic market and tougher competition from existing global incumbents.

5

25

45

65

85

105

Sales Growth(%)

EPS Growth(%)

RoE(%)

PE(x)

Consumer Durables DIXON IN EQUITY

38,000

42,600

47,200

51,800

56,400

61,000

1,675

2,270

2,865

3,460

4,055

4,650

Sep-20 Dec-20 Mar-21 Jun-21 Sep-21

DIXON IN EQUITY Sensex

India Equity Research Consumer Durables October 1, 2021

DIXON INITIATING COVERAGE

Amit Mahawar Angad Saluja Manoj Kumar K V +91 (22) 4040 7451 [email protected] [email protected] [email protected]

Corporate access

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Video

https://www.edelweissresearch.com/Research/Company?Id=4536

https://www.edelweissresearch.com/Podcasts?Search=Dixon+Technologies&FromDate=&ToDate=

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https://www.edelweissresearch.com/Videos

DIXON

Edelweiss Securities Limited

2 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset

Executive Summary

We are initiating coverage on Dixon, the largest listed manufacturer of consumer

electronics/durables in India. With a comprehensive capacity expansion plan and a

frugal cost-capital light structure, the company is positioned as the best play on the

burgeoning consumer electronics market and an even faster growing

electronic/durables manufacturing, thanks to a shift in supply chains to India.

As an added advantage, Dixon’s gradual and judicious entry in the global supply

chain could offer material scale as well as decent returns in the long run, unlike its

global peers. This could well be a decade-long growth super-cycle in our view.

Best case for consumer electronics/domestic sourcing-led growth

Double-digit growth in consumer electronics/durables market coupled with a

significant structural shift to local supply chain offers a robust 30%-plus CAGR for

Dixon’s TAM over the next three–five years. Additionally, concentration of supply-

chain to large-efficient OEMs ensures a consistent and significant uptick in revenue

market share for the company from 4/6% in FY17/21 to ~10% by FY25E.

Entry in global supply chain: Added advantage with decent returns

With domestic market offering initial scale and capacity ramp-up, Dixon’s entry in

the global supply chain with a judicious strategy (restricted to LED lights, mobile at

this stage) offers a much larger TAM of ~USD170bn than a relatively pale USD15bn

domestic opportunity. In our view, the company could sustain a far better returns

structure than global peers with a combination of business mix, efficiency and cost

structure over the next decade.

Global peers’ value creation phase; positive read-across for Dixon

We took a closer look at global giants in the EMS space (Foxconn, Pegatron) over the

past few decades to gauge stakeholder value creation across growth-return cycles.

Bulk of the wealth creation for stakeholders happened during the early part of

growth as returns scale up.

In the later more mature phase, as growth/returns normalised, there was a gradual

valuation de-rating. Initial growth/returns phase was characterised by concentrated

volumes from select large global clients that delivered maximum value to

stakeholders, while the mature stage had a fairly diversified set of clients/segments

largely with OEM model delivering more of average growth/returns.

Read-across for Dixon: In our view, Dixon’s earnings/return scale-up phase has

already begun led by domestic sourcing concentration, and this should have a longer

run complemented by global penetration. We argue, Dixon’s best phase of wealth

creation, in line with global peers, should unfold during its sustained return scale-up

over the next three–five years. Its growth/return scale-up, in our view, will sustain a

far superior track record, thereby warranting a materially higher valuation range

than global peers.

The game is scale and RoCE; we expect a step-up

Dixon clocked a solid 35%-plus top-line CAGR (FY16–21) yielding a healthy 30% RoCE

led by both healthy margins and scale-up. The bulk of FY21–25E ramp-up in revenues

will be domestic-led; a robust 3x-plus growth in TAM will lead to a healthy 50%-plus


DIXON

Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 3

CAGR in top-line. Meanwhile, Dixon’s lower cost and judicious mix should keep its

RoCE profile on an uptrend—moving from 30% to 48%-plus from FY21–25E.

Outlook and valuation: Best phase; initiate with ‘BUY’

Initial sourcing will stay concentrated with larger brands outsourcing the bulk to

large OEMs, which would benefit efficient scale players such as Dixon. Additionally,

the company’s business model is unique with presence across electronics/durables

manufacturing, offering a better business mix. At a mature stage, the business could

get a lower valuation given growth/return normalisation in line with global peers,

and that would hinge on Dixon’s ability to sustain returns superior to global peers.

We also note the increasing bias towards high-quality manufacturing by investors

given consistent government support to drive local manufacturing, relatively high

value addition, etc. This trend augurs well for large-scale players such as Dixon in the

long run.

We are initiating coverage with ‘BUY/SO’ recommendation/rating and TP of

INR5,700, valuing the stock at 40x PE (FY25E discounted EPS), in line with large

brands in India given strong earnings-return scale-up trajectory and an expanding

TAM basket with a comprehensive product basket.

Edelweiss Consumer Durables model portfolio

We are introducing Dixon in our model portfolio (exhibit 35) with a 10% weight. Our

model portfolio has outperformed Nifty by 15/30% and BSE CD Index by 8/17% over

a 6/12M period.

Top picks pecking order: Voltas, Crompton, KEI, Dixon and Bajaj Electricals

Key risks

Dixon has a major capex ramp-up plan, which requires significant production

mandate from local/global markets and efficient execution. Delay in approval cycle

and execution challenges w.r.t. production ramp-up pose key risks to our hypothesis.

Competition, particularly from incumbents, could risk expected global penetration.

DIXON



Target addressable market across players and offerings

Source: Edelweiss Research


DIXON


The Story in Charts

We expect Dixon’s TAM to expand exponentially…

…complemented by competitive business model…

…and domestic supply chain build-up…

…with reduced dependence on imports…

…translating to supernormal growth…

…warranting a premium valuation

Source: Company, Edelweiss Research

Foxconn

Pegatron

Quanta Computer

Flextronics International

Compal Electronics

Jabil

Wistron

Dixon

1.0

2.2

3.4

4.6

5.8

7.0

0 10 20 30 40EB

ITD

A %

ROCE %

0

1,200

2,400

3,600

4,800

6,000

FY16 FY17 FY18 FY19 FY20 FY21

Do

mes

tic

Pro

d. I

NR

bn

Consumer electronics Industrial electronicsComputer hardware Mobile phonesStrategic electronics Electronic components

80.0

82.0

84.0

86.0

88.0

90.0

0

1,000

2,000

3,000

4,000

5,000


%

INR

mn

Imports Exports Imports as a % of total

Dixon

Amber

Havells

Crompton

Whirlpool

HUL

Dabur

Nestle

FoxconnMidea Haier

Gree0.0

15.0

30.0

45.0

60.0

75.0

0.0 20.0 40.0 60.0 80.0

1 y

ear

forw

ard

PE

Earnings growth % (FY20-23E)

0.0

2.0

4.0

6.0

8.0

10.0

0

800

1,600

2,400

3,200

4,000

FY17 FY21 FY25

Rev

enu

e sh

are

%

INR

bn

Mobile TV LightingWM Security system RefrigeratorLaptop & Tablets Telecom Products Market share

1,124

3,572

595

0.0

6.0

12.0

18.0

24.0

30.0

0

80

160

240

320

400

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2E

FY2

3E

FY2

4E

FY2

5E

INR

bn

Revenue FA Turnover

DIXON



Financial Statements

Income Statement (INR mn) Year to March FY21A FY22E FY23E FY24E

Total operating income 64,482 1,29,380 1,90,344 2,62,514

Gross profit 6,785 13,326 19,605 27,301

Employee costs 1,371 1,545 1,886 2,365

Other expenses 2,548 6,469 9,517 13,126

EBITDA 2,866 5,312 8,202 11,811

Depreciation 437 798 1,123 1,513

Less: Interest expense 274 353 453 486

Add: Other income 16 43 61 86

Profit before tax 2,170 4,204 6,688 9,898

Prov for tax 572 1,060 1,685 2,494

Less: Other adj 0 0 0 0

Reported profit 1,598 3,145 5,002 7,404

Less: Excp.item (net) 0 0 0 0

Adjusted profit 1,598 3,145 5,002 7,404

Diluted shares o/s 59 59 59 59

Adjusted diluted EPS 26.9 52.9 84.1 124.5

DPS (INR) 1.0 2.7 4.3 12.7

Tax rate (%) 26.4 25.2 25.2 25.2

Important Ratios (%) Year to March FY21A FY22E FY23E FY24E

COGS (% of rev) 89.5 89.7 89.7 89.6

Employee cost (%of rev) 2.1 1.2 1.0 0.9

Other exp (% of rev) 4.0 5.0 5.0 5.0

EBITDA margin (%) 4.4 4.1 4.3 4.5

Net profit margin (%) 2.5 2.4 2.6 2.8

Revenue growth (% YoY) 46.5 100.6 47.1 37.9

EBITDA growth (% YoY) 28.5 85.4 54.4 44.0

Adj. profit growth (%) 32.6 96.8 59.1 48.0

Assumptions (%) Year to March FY21A FY22E FY23E FY24E

GDP (YoY %) (8.0) 9.0 7.0 NA

Repo rate (%) 4.0 4.0 4.3 NA

USD/INR (average) 74.2 73.0 72.0 NA

CE rev grwth (%) 83.4 74.0 43.4 30.6

Mobile rev grwth (%) 56.4 235.9 67.3 56.9

Lighting rev grwth (%) (3.2) 72.3 23.5 26.4

HA rev grwth (%) 8.8 102.0 37.6 22.2

Depreciation (% of FA) 6.9 10.0 10.0 10.0

Tax rate (%) 26.4 25.2 25.2 25.2

Valuation Metrics Year to March FY21A FY22E FY23E FY24E

Diluted P/E (x) 171.6 87.2 54.8 37.0

Price/BV (x) 37.2 26.6 18.2 12.7

EV/EBITDA (x) 94.7 51.0 32.8 22.5

Dividend yield (%) 0 0.1 0.1 0.3

Source: Company and Edelweiss estimates

Balance Sheet (INR mn) Year to March FY21A FY22E FY23E FY24E

Share capital 117 117 117 117

Reserves 7,256 10,212 14,915 21,431

Shareholders funds 7,373 10,329 15,032 21,548

Minority interest 0 0 0 0

Borrowings 1,513 2,013 2,513 2,883

Trade payables 17,097 26,390 38,825 53,487

Other liabs & prov 1,081 1,216 1,371 1,549

Total liabilities 28,457 41,480 59,426 81,320

Net block 4,099 6,011 8,139 10,527

Intangible assets 82 82 82 82

Capital WIP 2,046 2,046 2,046 2,046

Total fixed assets 6,226 8,138 10,267 12,655

Non current inv 1,272 1,272 1,272 1,272

Cash/cash equivalent 689 1,585 3,837 7,330

Sundry debtors 10,891 15,951 23,467 32,365

Loans & advances 145 153 160 168

Other assets 9,234 14,381 20,422 27,529

Total assets 28,457 41,480 59,426 81,320

Free Cash Flow (INR mn) Year to March FY21A FY22E FY23E FY24E

Reported profit 1,598 3,145 5,002 7,404

Add: Depreciation 437 798 1,123 1,513

Interest (net of tax) 202 264 339 363

Others 756 1,106 1,738 2,531

Less: Changes in WC (743) (648) (822) (1,005)

Operating cash flow 1,701 3,605 5,695 8,311

Less: Capex (1,682) (2,710) (3,252) (3,901)

Free cash flow 19 895 2,444 4,410

Key Ratios Year to March FY21A FY22E FY23E FY24E

RoE (%) 25.0 35.5 39.4 40.5

RoCE (%) 32.3 42.9 47.8 49.5

Inventory days 39 31 33 34

Receivable days 45 38 38 39

Payable days 84 68 70 72

Working cap (% sales) 3.5 2.4 2.1 2.0

Gross debt/equity (x) 0.2 0.2 0.2 0.1

Net debt/equity (x) 0.1 0 (0.1) (0.2)

Interest coverage (x) 8.9 12.8 15.6 21.2

Valuation Drivers Year to March FY21A FY22E FY23E FY24E

EPS growth (%) 30.8 96.8 59.1 48.0

RoE (%) 25.0 35.5 39.4 40.5

EBITDA growth (%) 28.5 85.4 54.4 44.0

Payout ratio (%) 3.7 5.0 5.0 10.0


DIXON


Investment Rationale

Competitive and scalable business model; multiple growth vectors

Dixon’s business model is highly scalable yet profitable, thanks to its frugal cost

structure, capital-light intensity and, above all, high manufacturing fungibility.

Domestic electronic/consumer durables manufacturing is slated to grow 2x-plus

versus the sector over coming 3–5 years, offering a huge 3x jump in TAM for

Dixon over FY21–25E as brands localise supply-chains. And breaking into global

supply-chain could enormously expand global TAM for Dixon in our view.

Best play on domestic market growth; high returns-scale feasible

Dixon was able to capture the consumer electronics outsourcing potential much

ahead of peers, which gives it a solid early-mover advantage. Flexibility across

OEM/ODM, high-fungibility and frugal cost structure offer long-term returns-

accretive scale. Dixon’s unique and sustainable competitive edge reflects well in its

industry leading growth, superior cash-returns structure. This makes it the best play

on consumer durable/electronics manufacturing growth, which makes the bulk of

FY21-25E growth and drives the initial scale/critical mass needed to penetrate global

supply-chain.

Consumer electronics and mobile phones to drive revenue growth


0

80

160

240

320

400

FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

INR

bn

Consumer electronics Home appliances Mobile & EMSLighting Security systems Reverse logisticsNetwork products

Highly fungible manufacturing, frugal

cost structure and asset-light model lend

sustainable competitive edge to Dixon

DIXON



Dixon fares better than global peers on margins

Source: Company, Bloomberg, Edelweiss Research

Cost effective production – Dixon’s key differentiator

Source: Company, Bloomberg, Edelweiss Research (Note: 3Y Average taken)

Foxconn

Pegatron

Quanta Computer

Flextronics International

Compal Electronics

Jabil

Wistron

Dixon

1.0

2.2

3.4

4.6

5.8

7.0

0 5 10 15 20 25 30 35

EBIT

DA

%

ROCE %

0.0

25.0

50.0

75.0

100.0

125.0

Dixon Foxconn Pegatron Quantacomputer

Compal Wistron

%

COGS Gross profitR&D Sales/Marketing/AdvertisementGeneral & Admin EBITDA


DIXON


Entry in global supply chain; execution key to expanding TAM

Dixon, leveraging its key strengths, was able to ramp up its revenue market share

from 4% to 6% over FY17–21 with TAM coverage jumping from USD9bn to USD15bn,

largely domestic. The company is particularly targeting segments such as LED lights

and mobile phones, wherein it has made globally comparable capacity/inroads with

global players.

If it executes on these two segments well, Dixon’s addressable target market/EBIT

pool could jump 5–10x over FY21-25E. Domestic opportunity for Dixon is pegged at

~USD50bn by FY25E if one goes by growth across segments, global potential could

be USD170bn in LED lights/mobile phones alone (three global players only).

The Indian EMS industry is pegged at USD6bn, according to the company, implying

a ~15% market share, which has improved from ~9% in FY17. Our estimate of Dixon’s

revenue share, based on its realisation and value addition, shows gains in market

share from existing ~6% to ~10% by FY25.

While the industry has been growing handsomely…

Source: Crisil, Meity, Industry estimates, Edelweiss Research

…we expect Dixon’s TAM to expand exponentially

Source: Crisil, Meity, Industry estimates, Edelweiss Research

0

1,000

2,000

3,000

4,000

5,000

FY17 FY21 FY25E

INR

bn

Mobile TV Refrigerator Laptop & Tablets

Lighting Security systems WM Telecom products

5,126

1,428

2,775

Domestic TAM for Dixon is slated to grow

3x to ~USD50bn (FY21–25E), while

targeted global penetration pegs TAM at

~USD170bn (only considering LED lights

and mobile as categories)

0.0

2.0

4.0

6.0

8.0

10.0

0

800

1,600

2,400

3,200

4,000

FY17 FY21 FY25

Rev

enu

e sh

are

%

INR

bn

Mobile TV LightingWM Security system RefrigeratorLaptop & Tablets Telecom Products Revenue share

595

3,572

1,124

DIXON



Dixon caters to three of top five in TV brands…

Source: Industry estimates, Edelweiss Research

…top two out of five in washing machines…


…one out of five in mobile phones…


…and four out of five in lighting in India


Samsung, 29%

LG, 26%

Sony, 18%

Xiaomi, 14%

Panasonic, 7%

LG, 30%

Samsung, 20%

Godrej, 8%

Whirlpool, 14%

IFB, 11%

Xiaomi, 27%

Samsung, 21%

Oppo, 11%

Realme, 6%Apple, 3%

Philips, 17%

Havells, 6%

Bajaj Electricals, 5%

Crompton, 5%

Surya Roshni, 5%


DIXON


Decoding global EMS giants: Read-across for Dixon

The global EMS industry is dominated by large Taiwanese players, which cater to

large global brands. Foxconn and Pegatron are two such players with a lion’s share

(more than 50%) of the EMS industry.

Foxconn, the largest EMS player globally…

Source: Bloomberg, Edelweiss Research

…with a dominant market share of 40.9%


Foxconn

With revenue of USD182bn in 2020, which has compounded at ~7% over the past

ten years, Foxconn has emerged as the largest player in the EMS industry. Long-term

contracts with marquee clients have been key to its success, even though top

customer revenue contribution remains elevated at ~52% (10-year average), which

seems to be the case across large EMS players.

The main segments that Foxconn operates in and derives 100% of revenue from are

the 3Cs:-Consumer electronics (smartphones, TVs, game consoles), Cloud network

products (servers, routers, edge computing, data centres, satellite communication,

other related products) and Computing (desktops, notebooks, tablets, office

machines, printers).

Foxconn: A financial snapshot (USD mn)

Particulars 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenue 1,17,478 1,32,070 1,33,128 1,38,996 1,41,187 1,35,274 1,54,732 1,75,699 1,72,944 1,81,983

Top client % 48.7 57.2 50.6 54.8 53.7 54.2 51.1 49.4 50.2 54.0

COGS 1,08,414 1,23,607 1,24,549 1,29,365 1,31,088 1,25,294 1,44,771 1,64,679 1,62,720 1,71,694

Gross profit 9,064 8,463 8,579 9,631 10,099 9,980 9,961 11,020 10,224 10,288

Gross profit % 7.7 6.4 6.4 6.9 7.2 7.4 6.4 6.3 5.9 5.7

R&D 1,390 1,544 1,569 1,612 1,653 1,587 2,689 2,802 2,963 3,196

Sales/Marketing/Advertisement 2,475 867 872 863 819 699 970 1,085 975 925

General & Admin 2,380 2,403 2,456 2,433 2,452 2,265 2,602 2,614 2,567 2,403

EBITDA 4,570 5,944 6,162 7,041 7,419 7,393 5,706 6,508 5,888 5,976

EBITDA % (RHS) 3.9 4.5 4.6 5.1 5.3 5.5 3.7 3.7 3.4 3.3

ROE % 15.4 15.5 15.1 15.4 15.2 14.3 12.8 11.2 9.4 8.0

ROCE % 9.4 9.2 9.2 10.5 11.9 11.8 9.7 8.7 8.8 6.7


0

100

200

300

400

500

2015 2016 2017 2018 2019 2020

USD

bn

Foxconn (HonHai Precision) PegatronQuanta Computer Flextronics InternationalCompal Electronics JabilWistron

Foxconn (HonHai

Precision), 40.9

Pegatron, 10.7

Quanta Computer,

8.3

Compal Electronics,

8.0

Jabil, 6.1

Wistron, 6.4

Others, 19.6

DIXON



Share of top client remains high for Foxconn


FY00–07, the growth phase for Foxconn


Major client addition history for Foxconn over its listed history


Pegatron

Founded in 2008, Pegatron Corporation is also a Taiwanese electronics

manufacturing company. It mainly develops computing, communications and

consumer electronics for branded vendors. It also develops, designs and

manufactures computer peripherals and components.

Revenue stood at USD47.5bn in 2020, which has compounded at ~10% over the past

ten years. Pegatron is thus the second-largest player by revenue after Foxconn. Top

client revenue contribution remains high at 10-year average of ~54% and has picked

up in the past four years (~62% average).

Key segments that Pegatron operates in are Consumer products & other products

(tablets, game consoles, wearable device, smart home devices and automotive

electronics), Computing products (notebook PCs, desktop PCs and motherboards),

and Communication products (smart phones, routers, set top boxes and cable

modems).

3.0

3.6

4.2

4.8

5.4

6.0

47.0

49.5

52.0

54.5

57.0

59.5

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

%%

Top client % EBITDA % (RHS)

0

30

60

90

120

150

Dec

-99

Dec

-00

Dec

-01

Dec

-02

Dec

-03

Dec

-04

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Dec

-16

Dec

-17

Dec

-18

Dec

-19

Dec

-20

TWD

Price

Apple

Dell

HP

Lenovo IBM

Microsoft

Sony

Vizio

Cisco

19.5

15.1

-8.2

49.3

14.7

5.6

22.1

10.7 8.5

-10.0

5.0

20.0

35.0

50.0

65.0

2000-2007 2009-2017 2017-2020

%

Share price return (CAGR) Revenue (CAGR) Avg. ROCE


DIXON


Pegatron: A financial snapshot (USD mn)

Particulars 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenue 20,413 29,800 31,991 33,642 38,232 35,930 39,246 44,474 44,226 47,528

Top client % 45.3 35.5 41.2 48.8 60.1 59.7 61.4 63.0 60.6 61.0

COGS 19,495 28,547 30,458 31,681 35,861 33,973 37,712 43,121 42,766 45,843

Gross profit 919 1,252 1,533 1,961 2,371 1,957 1,534 1,353 1,460 1,685

Gross profit % 4.5 4.2 4.8 5.8 6.2 5.4 3.9 3.0 3.3 3.5

R&D 337 408 402 407 462 437 439 491 478 567

Sales/Marketing/Advertisement 316 146 220 282 304 185 162 166 164 169

General & Admin 234 286 386 339 355 330 309 300 271 302

EBITDA 403 854 992 1,389 1,681 1,407 1,062 943 1,150 1,269

EBITDA % (RHS) 2.0 2.9 3.1 4.1 4.4 3.9 2.7 2.1 2.6 2.7

ROE 0.1 6.8 9.4 12.2 16.8 13.0 10.0 7.5 12.6 12.6

ROCE 2.4 6.4 7.9 9.2 12.3 9.7 7.3 4.8 6.9 7.4


Margins back to decadal lows


Communication products contribute significantly


High growth phase for Pegatron leading to better ROCEs


1.5

2.2

2.9

3.6

4.3

5.0

30.0

37.0

44.0

51.0

58.0

65.0

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

%%

Top client % EBITDA % (RHS)

Computing, 13 Consumer

electronics, 13

Communication, 61

Others, 13

9.5

-3.4

11.5

3.4

7.9 6.4

-5.0

-1.0

3.0

7.0

11.0

15.0

2011-2017 2018-2020

Share price return (CAGR) Revenue (CAGR) Avg. ROCE

DIXON



Rising ODM mandate for smartphones by key OEMs globally

OEM Outhouse design 2019 Outhouse design 2020E

Samsung 9% 22%

Huawei 17% 18%

Xiaomi 77% 74%

Oppo 44% 51%

Lenovo 84% 89%

LG 49% 56%

Nokia 54% 88%

Source: Omdia, Edelweiss Research

Key observations

The sharp dip in EBITDA margins at the two companies is attributable to the

erosion in gross margins 2017 onwards and also the uptick in R&D spends for

Foxconn, adding further pressure on margin.

R&D spends remain a key focus area in order to increase product offerings as

well as to steer the shift from OEM to ODM business model.

Higher dependence on revenue from top customer seems to be the industry

phenomenon, adding to concentration risk.

For Foxconn and Pegatron, best m-cap creation happened during

returns/growth scale up, client concentration notwithstanding.

Global EMS players — A brief overview

Company Revenue

(USD Bn)

Revenue (10Y

CAGR)

PAT (10Y

CAGR) RoCE %

Top client

concentration %

(5Y Avg.)

Key segments

Foxconn (HonHai

Precision) 182 6.7 2.0 6.7 51.8 Smartphones, TVs, Desktops, Notebooks, Tablets, etc.

Pegatron 48 10.9 12.7 7.4 61.1 Smartphones, Desktops, Notebooks, Tablets, Smart home

devices, etc.

Quanta Computer 37 0.4 4.1 7.5 56.8 Notebooks, Cloud computing, Mobile communications

products

Compal

Electronics 36 2.4 -8.5 5.2 40.7

Notebooks, Smartphones, Tablets, Smart wearable devices,

etc.

Jabil 27 7.4 5.7 2.0 23.6 Acoustics, Additive manufacturing, Adhesives,

Environmental technologies, Fluidics, etc.

Wistron 29 3.9 -2.5 7.8 22.4 Notebooks, Smartphones, Display products, VoIP phones,

etc.


Best phase of stakeholder value creation

for global majors such as Foxconn and

Pegatron was during returns/growth

scale-up


DIXON


Valuation

Decade-long phase of growth/returns super-cycle

Execution track record and robust business model is well complemented with

an expanding domestic market that will drive a super-growth and returns cycle

for Dixon.

Bulk of the super-normal growth in 3–5 years is domestic-led, while entry into

global supply chain will provide a sustained long-term phase of high

growth/returns trajectory, warranting premium valuation over the next decade.

Dixon’s business model has many sustainable competitive edges—first-mover

advantage, scalable revenue streams, low cost-capital intensity, among others--

leading to high returns structure/FCF generation. Past five years’ revenue/EBITDA

CAGR of 36%/38% reflects significant outperformance to consumer durables

industry, reflecting a strong market share ramp-up as brands seek to shift supply

chain to India.

Going ahead, industry-leading growth for Dixon looks like a done deal as favourable

policy initiatives (PLI, rising duty structure for imports, etc expand its overall TAM

and EBITDA pool. And this is complemented by the company’s aggressive and timely

capacity creation.

What could surprise Street going ahead?

Dixon has made deep inroads in its strategy of penetrating global supply chain,

especially in LED lights and mobile phones, with a global scale LED set-up (fifth

largest globally). And is set for a solid ramp-up in mobile phones, supplying

domestically to Samsung and Motorola/Nokia as their global supply chain partner.

In our view, these two segments offer a larger global market to Dixon and pose an

upside risk to consensus over the next three–five years.

Valuation and TP

We expect Dixon to compound its top line/PAT by a robust 51%/60% over FY21–25

versus its TAM CAGR of 34% as it ramps up market share, ably complemented by

rising manufacturing footprint and aggressive expansion. While domestic revenue

ramp-up is more or less predictable, we believe exports could see material step-up,

posing upside risk to growth/returns.

With high earnings growth trajectory, scale-up in returns/FCF, Dixon could generate

stakeholders return materially higher than what was seen in its global peer set,

which had also traded at peak valuation during their growth/returns phase (click to

read our global case study on Foxconn/Pegatron).

We are initiating coverage on Dixon with ‘BUY/SO’ and target price of INR5,700

(24% upside potential), assigning a premium 40x PE on discounted FY25E earnings,

recognising the earnings/returns super-cycle over FY21–25 and significant addition

to its TAM (domestic stands at USD50bn by FY25E. Meanwhile, global opportunity

is >3x domestic TAM and that too only considering LED lights and mobile.

A 10x potential expansion in global TAM

over five years coupled with highly

scalable business model with best-in-

class returns/cash flows makes a strong

case for valuations to be in line with

premium brands’

DIXON



Dixon’s one-year forward P/E


Our DCF based alternative valuation accounts for ~85% of our PE-based target price

Particulars FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E Terminal

EBIT 2,429 4,514 7,079 10,297 14,575 19,029 24,171 30,316 37,737 46,818

Less Tax -572 -1,060 -1,685 -2,494 -3,558 -4,687 -5,987 -7,542 -9,423 -11,727

Add Depreciation 437 798 1,123 1,513 1,981 2,543 3,217 4,092 5,231 6,710

Cash flow 2,294 4,253 6,517 9,316 12,998 16,885 21,401 26,866 33,544 41,800

Change in WC -743 -648 -822 -1,005 -1,047 -1,331 -1,554 -1,884 -2,306 -2,855

Capex -1,682 -2,710 -3,252 -3,901 -4,681 -5,616 -6,739 -8,757 -11,381 -14,791

Free cash Flow (131) 895 2,444 4,410 7,270 9,938 13,108 16,225 19,857 24,154 26,611

Discounting factor 0.9 0.8 0.7 0.7 0.6 0.5 0.5 0.4 0.4

Discounted free cash flow - - 2,203 3,584 5,326 6,562 7,803 8,707 9,606 10,533 11,604

Free cash Flow 54,323 19%

Terminal Value 2,35,298 81%

Value of the firm 2,89,621

As at March 2021

Less: Debt 1,513

Add: Cash 689

Value of Equity 2,88,796

No of shares 59.5

Value per share 4,856


DCF key assumptions

Key assumption

Beta 0.94

Terminal growth rate (%) 6.0%

Equity/Total capital (%) 83.0%

Risk-free rate (%) 6.0%

Equity risk premium (%) 6.0%

WACC (%) 11.0%


10

32

54

76

98

120

Oct

-17

Dec

-17

Feb

-18

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct

-19

Dec

-19

Feb

-20

Ap

r-2

0

Jun

-20

Au

g-2

0

Oct

-20

Dec

-20

Feb

-21

Ap

r-2

1

Jun

-21

Au

g-2

1

(X)

1 year forward PE Average +1 SD -1 SD


DIXON


Global valuation comparison snapshot FY20-23E CAGR (%) P/E (X) P/B (X) EV/EBITDA (X) ROE (%) ROCE (%)

Company Mcap (USD mn) Revenue PAT FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E

Dixon 3,582 62.9 60.7 84 53 25.0 17.2 48.5 31.2 35.5 39.4 41.1 45.8

India EMS/ODM

Amber 1,432 12.9 21.6 49 35 5.5 4.8 25.3 19.6 12.0 14.6 14.8 17.3

Consumer Durables

Havells 12,016 13.2 24.8 58 48 11.9 10.5 39.1 32.9 21.5 23.1 25.2 27.1

Crompton 4,076 11.0 13.1 47 40 13.0 11.3 35.0 30.4 29.8 30.2 35.6 35.9

Whirlpool 3,871 10.9 11.1 53 41 8.2 7.0 33.4 26.1 16.7 18.5 19.2 22.0

Average 11.7 16.3 53 43 11.0 9.6 35.8 29.8 22.7 23.9 26.7 28.3

Consumer Staples

HUL 87,509 13.5 17.2 70 61 13.6 13.3 49.4 43.6 19.5 22.1 26.6 29.8

Dabur 15,627 12.2 15.1 54 46 12.6 11.1 46.0 39.1 24.6 25.5 30.1 31.7

Marico 9,760 11.8 14.8 48 41 17.5 15.4 31.9 27.9 39.6 39.6 47.2 48.1

Nestle 25,970 10.4 13.3 69 61 60.4 45.1 47.1 41.2 103.1 85.1 141.7 117.0

ITC 39,802 6.4 3.9 16 14 4.0 3.8 11.5 10.2 25.7 27.2 34.3 36.3

Britannia 13,205 9.7 13.1 56 48 21.3 16.8 41.3 35.3 43.0 39.2 41.8 42.8

Average 10.7 12.9 52 45 21.6 17.6 37.9 32.9 42.6 39.8 53.6 51.0

Global EMS/ODM

Foxconn 53,798 3.8 18.7 11 10 1.1 1.0 5.1 4.3 10.0 10.4 - -

Pegatron 6,478 -2.8 -0.0 9 10 1.1 1.0 6.6 5.6 11.7 10.1 - -

Wistron 2,893 0.4 4.0 9 9 1.0 0.9 5.3 4.1 11.7 11.9 - -

Jabil 9,072 4.4 37.0 11 10 4.2 3.6 5.0 4.5 41.7 37.2 - -

Quanta computer 10,904 1.8 4.3 10 11 2.0 1.9 6.1 5.8 19.9 18.5 - -

Flextronics International 9,296 2.6 8.9 13 11 2.8 2.5 6.4 6.7 23.1 24.6 - -

Compal Electronics 3,866 2.1 3.5 9 11 1.0 0.9 7.8 6.2 10.3 9.1 - -

Average 1.8 10.9 10 10 1.9 1.7 6.0 5.3 18.3 17.4 - -

Global Consumer Durables

Midea 74,280 7.3 10.2 17 15 3.6 3.1 14.2 11.8 21.7 21.8 - -

Haier 34,117 6.9 29.1 18 15 3.0 2.7 10.1 8.1 17.1 18.0 - -

Gree 35,691 10.0 9.2 9 8 1.9 1.7 3.8 3.0 19.6 20.5 - -

Average 8.1 16.2 15 13 2.8 2.5 9.4 7.6 19.4 20.1 - -


DIXON



Premium valuations to sustain given high earnings growth


Dixon: Outlier on revenue growth as well as return on equity


Edel Consumer Durables model portfolio

Edel model portfolio outperformance vs Nifty and BSE CD index Outperformance vs

Nifty BSE CD Index Edel portfolio Nifty BSE CD Index

1M 3.2 9.1 10.7 7.5 1.7

3M 3.2 9.1 10.7 7.5 1.7

6M 18.5 26.0 33.8 15.3 7.8

12M 56.6 70.3 87.0 30.4 16.7


Dixon

Amber

Havells

Crompton

Whirlpool

HUL

Dabur

Nestle

FoxconnMidea Haier

Gree

0.0

15.0

30.0

45.0

60.0

75.0

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.01

yea

r fo

rwar

d P

E

Earnings growth % (FY20-23E)

Dixon

Amber

Havells

Crompton

Whirlpool

HUL

Dabur

FoxconnPegatron

Midea

Haier

Gree

5.0

12.0

19.0

26.0

33.0

40.0

-5.0 5.0 15.0 25.0 35.0 45.0 55.0 65.0 75.0

RO

E %

Revenue growth % (FY20-23E)


DIXON


We introduce Dixon in our model portfolio with a 10% weight

Company Old weight New weight Change

Havells 10 10

Voltas 25 20

Polycab 10 10

Bajaj Electricals 20 15

Crompton 15 15

KEI Industries 20 20

Dixon NA 10

Total 100 100


Edel Consumer Durables Valuation snapshot


FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E FY20 FY21E FY22E FY23E

Top Picks

Voltas Buy 1,218 1,250 76.6 75.6 92.0 105.2 9.0 8.5 9.3 9.6 17.2 15.9 22.3 26.3 70.9 76.7 54.7 46.3 13.5 11.3 14.1 15.1

Crompton Buy 479 550 45.1 47.5 54.6 61.7 13.2 14.8 14.8 15.1 7.9 9.6 9.8 11.4 60.7 49.6 48.9 42.0 38.6 35.7 29.8 30.2

Baja j Electrica ls Buy 1,306 1,275 49.8 45.7 56.3 64.0 4.2 6.6 7.7 8.1 0.0 15.1 24.9 31.4 NA 86.4 52.5 41.6 0.0 11.5 16.4 17.9

KEI Buy 927 900 48.8 41.8 52.3 64.3 10.2 11.0 11.1 11.6 28.5 30.5 39.7 52.8 32.5 30.4 23.3 17.6 22.3 16.6 18.3 20.3

Dixon Buy 4,612 5,700 44.0 64.5 129.4 190.3 5.1 4.4 4.1 4.3 20.5 26.9 52.9 84.1 224.5 171.6 87.2 54.8 26.2 25.0 35.5 39.4

Others

Polycab Buy 2,389 2,800 88.3 89.3 112.4 136.6 12.9 13.1 13.3 13.5 51.0 59.2 68.2 84.7 46.9 40.4 35.0 28.2 22.7 20.3 19.5 20.1

Havel ls Hold 1,373 1,100 94.3 104.3 117.4 136.7 10.9 15.0 14.7 14.9 11.7 16.6 18.8 22.8 117.2 82.7 72.9 60.3 17.3 22.0 21.5 23.1

Whirlpool Reduce 2,285 1,943 59.9 59.0 69.3 81.8 11.2 8.8 10.5 11.3 37.5 26.3 40.0 51.4 60.9 87.0 57.2 44.4 20.3 12.4 16.7 18.5

Symphony Reduce 1,071 690 11.0 9.0 11.5 13.2 19.2 15.5 15.7 16.3 26.0 15.3 19.8 23.9 41.2 69.8 54.0 44.9 28.4 16.3 17.1 18.2

Amber Hold 3,264 2,832 39.6 30.3 46.6 57.1 7.8 7.3 9.1 9.2 50.4 23.3 67.1 87.5 64.8 140.0 48.6 37.3 15.0 5.7 13.2 15.0

P/E (x) RoE (x)Company Reco

CMP

(INR)

TP

(INR)

EPS (INR)Revenue (INR bn) EBITDA margins (%)

DIXON



Financial Outlook

Dixon’s 3x-plus growth vis-à-vis consumer durables sector is premised on a

consistent ramp-up in its revenue market share and concentrated sourcing by

larger brands for efficiency and scale reasons.

Production ramp-up in existing/new capacities should see a consistent rise in

RoCEs for Dixon, which is the most important matrix for investors in our view.

Capacity creation, rising mandates to drive solid growth

We expect Dixon to sustain 3x-plus growth track record versus industry over FY21–

25, which is a realistic assumption with further upside potential from exports. In

contrast to past four–five years, Dixon has committed to significant capacity creation

with FY22E capex of INR2bn (we see further upside), on the back of PLI initiatives

with significant skin in the game by global/local brands.

Our assumption of 51% revenue CAGR (FY21–25E) factors in INR32bn (cumulative)

of exports till FY25E (at ~5% of revenues), which could see material upside, in case

Dixon is able to translate higher mandates in LED lights and mobile phones.

Strong top-line growth with high FA turnover ratio


The game is scale and RoCE; we expect material step-up

Dixon reported an EBITDA margin of 4.4% in FY21 amid a challenging environment.

As the company’s margin closely tracks the ODM share in overall revenue (see

exhibit below), we believe EBITDA margin scale-up will remain range-bound given

higher trend of OEM business by brands and as Dixon attracts value segments with

significant scale.

What is critical for Dixon is the scale it attains across segments from local/global

markets and the returns (RoCE) it is able to generate efficiently. For us, these are by

far the most critical parameters to judge Dixon in the medium to long run. Even a

fraction of share from the global supply chain for Dixon could swing the returns

structure materially; hence global mandates offer potential upside to the modelled

returns trajectory.

Given its recent 2x industry growth,

Dixon is slated to post 3x-plus growth

versus sector in top line over FY21–25E.

Significant TAM addition complemented

with competitive-capacity creation and

mandates would act as key growth

drivers.

Significant scale-up in revenues and

profitability to drive RoCEs meaningfully

for Dixon

0.0

6.0

12.0

18.0

24.0

30.0

0

80

160

240

320

400

FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

INR

bn

Revenue FA Turnover


DIXON


EBITDA margins to stay range-bound…


…with PAT margins also following the trend


As the company ramps up in existing segments as well as goes past the teething

phase of new segments, we believe return ratios will rise as it gains scale, churning

out higher revenues from capital base leading to higher fixed asset turnover ratio as

well. We understand B2B ramp-up has its own set of challenges (global approvals,

phased ramp-up, quality parameters, etc). Hence clarity on timelines/milestones will

remain key to stock performance.

EBITDA % closely tracks ODM % in revenue


Returns ratios to ramp up significantly


DuPont analysis FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E

NP margin (%) 1.9 2.1 2.1 2.7 2.5 2.4 2.6 2.8 3.1

Total assets turnover (x) 11.4 9.4 5.6 6.2 7.2 10.6 11.4 11.4 10.9

Leverage multiplier (x) 1.4 1.2 1.5 1.6 1.4 1.4 1.3 1.3 1.2

RoE (%) 30.3 23.8 18.3 26.2 25.0 35.5 39.4 40.5 40.8


3.5

3.9

4.3

4.7

5.1

5.5

0

4

8

12

16

20

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2E

FY2

3E

FY2

4E

FY2

5E

%

INR

bn

EBITDA EBITDA % (RHS)

1.5

1.9

2.3

2.7

3.1

3.5

0

3

5

8

10

13

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2E

FY2

3E

FY2

4E

FY2

5E

%

INR

bn

PAT PAT % (RHS)

3.5

3.9

4.3

4.7

5.1

5.5

20.0

24.0

28.0

32.0

36.0

40.0


%%

ODM as a % of revenue EBITDA % (RHS)

15.0

23.0

31.0

39.0

47.0

55.0

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2E

FY2

3E

FY2

4E

FY2

5E

%

ROACE ROAE

DIXON



EVA generated by Dixon

Particulars (INR mn) FY20 FY21 FY22E FY23E FY24E FY25E

EBITDA 2,231 2,866 5,312 8,202 11,811 16,557

Interest 350 274 353 453 486 552

Tax rate 23.1 26.4 25.2 25.2 25.2 25.2

Interest benefit 81 72 89 114 122 139

Tax 516 756 1,339 2,067 2,976 4,172

NOPAT 1,796 2,183 4,062 6,249 8,957 12,523

Shareholders’ equity 5,413 7,373 10,329 15,032 21,548 30,210

Total debt 828 1,513 2,013 2,513 2,883 3,253

Capital Invested 6,242 8,886 12,342 17,545 24,431 33,463

WACC 11.3 11.2 11.2 11.3 11.3 11.4

EVA 1,091 1,188 2,679 4,273 6,189 8,714


Cash conversion cycle across Indian EMS/ODM and Consumer Durables brands Year Dixon Amber PG Electroplast Havells Crompton Whirlpool Polycab

Inventory days FY20 43 67 55 119 49 104 112

FY21 39 100 59 127 55 121 108

Debtor days FY20 49 76 53 13 41 16 63

FY21 45 116 64 14 36 20 65

Creditor days FY20 79 128 72 93 77 134 82

FY21 84 200 86 85 100 151 75

Cash cycle FY20 12 15 37 38 13 -13 93

FY21 1 16 37 56 -8 -10 98


Proposed capacity expansion across segments

Segment Current

capacity

Planned

increase Comment

TV 4.4mn p.a. 5.5mn p.a. Currently capacity ~30% of the Indian TV market with the

proposed capacity expected to increase that to ~35%.

WM 1.2mn p.a. 2.1mn p.a.

Semi-automatic WM capacity to increase from 1.2mn to

1.5mn p.a. and another 0.6mn to be added for top load

fully automatic WM. Currently capacity ~28% of the

Indian demand.

Mobile

Phone 45mn p.a. 57mn p.a.

Capacity expansion planned for smartphones from

existing 3mn units to 12mn units p.a.

Lighting 378mn p.a. - Current capacity of LED bulbs ~50% of the Indian

requirement, battens at ~56% and Downlighters at ~50%.



DIXON


Key assumptions for Dixon

Particulars (INR mn) FY19 FY20 FY21 FY22E FY23E FY24E FY25E

LED TV

- Volumes (in mn) 1.1 2.1 2.8 4.6 6.0 6.8 7.1

- Realization 9,869 9,314 13,358 14,426 15,869 18,249 21,899

LED TV revenue 11,152 19,652 37,268 65,639 94,420 1,23,182 1,55,133

AC PCB

- Volumes (in mn) 0.9 1.3 1.1 1.1 1.2 1.6 2.3

- Realization 873 980 1,058 1,132 1,211 1,296 1,386

AC PCB revenue 785 1,300 1,158 1,239 1,459 2,029 3,257

Consumer electronics revenue 11,937 20,952 38,426 66,879 95,879 1,25,211 1,58,390

- Volumes (in mn) 0.8 0.8 0.9 1.7 2.2 2.4 2.6

- Realization 4,992 4,954 4,844 5,183 5,546 6,101 6,833

Home appliances revenue 3,744 3,963 4,312 8,708 11,980 14,642 17,424

- Volumes (in mn) 3.3 11.0 25.0 39.0 45.5 53.7 61.5

- Realization (blended) 1,077 489 268 659 970 1,316 1,559

Mobile phone revenue 3,549 5,369 6,707 25,693 44,140 70,650 95,869

- Volumes (in mn) - - 2.2 3.2 3.7 4.0 4.5

- Realization - - 722 758 789 812 837

Set-top box revenue - - 1,562 2,389 2,919 3,250 3,766

- Volumes (in units) - - 535 500 500 500 500

- Realization - - 2,40,000 2,44,800 2,49,696 2,54,690 2,59,784

Medical equipment revenue - - 128 122 125 127 130

Mobile & EMS revenue 3,549 5,369 8,398 28,204 47,183 74,028 99,764

- Volumes (in mn) 164 209 212 332 365 405 432

- Realization (blended) 56 55 52 57 64 73 84

Lighting revenue 9,194 11,397 11,037 19,019 23,480 29,668 36,109

- Volumes (in mn) 2 5 4 5 6 8 9

- Realization 501 480 527 553 581 622 684

Security systems revenue 1,120 2,164 2,176 2,822 3,661 4,787 5,813

Reverse logistics 302 156 133 147 161 177 195

Others (network products) - - - 3,600 8,000 14,000 20,000

Total 29,845 44,001 64,482 1,29,380 1,90,344 2,62,514 3,37,696

Gross profit 3,752 5,399 6,785 13,326 19,605 27,301 35,458

Gross profit % 12.6 12.3 10.5 10.3 10.3 10.4 10.5

EBITDA 1,349 2,231 2,866 5,312 8,202 11,811 16,557

EBITDA % 4.5 5.1 4.4 4.1 4.3 4.5 4.9

PAT 634 1,205 1,598 3,145 5,002 7,404 10,562

PAT % 2.1 2.7 2.5 2.4 2.6 2.8 3.1

ROACE % 22.0 26.9 29.9 41.1 45.8 47.5 48.9

ROAE % 18.3 26.2 25.0 35.5 39.4 40.5 40.8


DIXON



Key Risks

Outsourcing trend reversal

Past few years have seen a rising trend in outsourcing and a shift in supply chain

towards India, among others (China + one strategy), leading to creation of a robust

supply chain. Capital allocation decision by brands – local and global – remains the

key factor affecting growth for OEM/ODM players such as Dixon and Amber. Any

significant reversal in this outsourcing will reduce overall TAM and hence

manufacturers’ growth potential.

Production mandates and global competition

As the domestic market attains globally-competitive scale, one of the prime

challenges to success of the PLI scheme targeted at creating global champions is

competition from China and other Asian exporting economies. Existing deliberations

by Dixon/Amber etc in components, LED lights, mobile phones, etc are indicative of

global ambitions of select domestic players. However, execution over the next

three–five years remains key to establishing global competitiveness.

Domestic growth slowdown

Domestic consumer durables demand is a growth engine for listed OEM/ODM

players given insignificant exports mix at this stage. Any material slowdown in

domestic market growth across key categories – LED TV, LED Lights, mobile phones

– remains a key risk to our FY22–25 projections.


DIXON


Company Description

Dixon, founded in 1993, is a leading player in the Indian electronics manufacturing

services industry. It started out as a manufacturer of colour televisions in 1994, but

has ventured in to multiple segments over the years, including consumer durables,

home appliances, lighting, mobile phones and security devices. It also provides

refurbishment services for a wide range of products such as set-top boxes, mobile

phones and LED TV panels.

The company caters to global as well as domestic brands as an original equipment

manufacturer (OEM) and an original design manufacturer (ODM). Backward

integration and cost-effective manufacturing are the key differentiating factors from

its competitors. It have 16 integrated manufacturing plants with presence in north

as well as south India (Noida, Dehradun and Tirupati).

Manufacturing footprint across India


Dixon’s holding structure


Dixon Technolgoies

India

Dixon Global Pvt. Ltd.

(100%)

Padget Electronics Pvt.

Ltd.

(100%)

AIL Dixon Technologies

Pvt. Ltd.

(50% JV)

Dixon Electro Appliances Pvt.

Ltd.

(100%)

Dixon Electro Manufacturing

Pvt. Ltd.

(100%)

Dixon Technologies Solutions Pvt.

Ltd.

(100%)

Dixon Devices Pvt. Ltd.

(100%)

DIXON



Key segments

Increasing product offerings at core of Dixon’s strategy


Consumer electronics

The company undertakes manufacturing of LED TVs with capacity at 4.4mn units p.a.

According to the company, this is ~30% of the Indian market’s requirement. Dixon

has emerged as an end-to-end solutions provider with fully backward integrated

manufacturing and a diverse product portfolio for Indian as well as foreign brands.

This segment contributed ~60% to FY21 revenue with 2.7% operating margin, RoCE

of 210% and ODM share of 5%. USP includes auto insertion, SMT, LCM module

assembly and backward integration into LED panel assembly.

Key products – 19-65 inches ATV, 2K, 4K UHD, Smart, Semi-smart, Android certified,

Linux-based TV with AIOT platform and voice control features.

Dixon’s marquee clients in consumer electronics


Revenue and operating margin profile


1994: Color TVs

2007: LCD TVs

2008: CFL Lighting & Reverse Logistics

2010: LED TV & WMs

2016:Mobile phones

2017: CCTV & DVR

2021:Medical Electronics, Set top box & Wearables

Future: IT hardware, Ref, Telecom products

8 11 12

21

38

1.5

1.9

2.2

2.6

2.9

3.3

0

8

16

24

32

40

FY17 FY18 FY19 FY20 FY21

%

INR

bn

Consumer electronics revenue Operating margin (RHS)


DIXON


Lighting products

Dixon is among the top 10 global players in the lighting products segment backed by

its strong R&D, enabling it to develop low-cost innovative products. Backward

integration within the segment includes sheet metal, plastic moulding and wound

components. This segment contributed ~17% to FY21 revenue with 8.8% operating

margin, RoCE of 29% and ODM share of 90%. Current capacity is 300mn LED bulbs

p.a., 5mn battens per month and 1.5mn downlighters per month.

Key Products – LED lights, Ballast, Tube lights, Battens, Downlighters and LED drivers

Marquee clients in lighting




2.0

3.5

5.0

6.5

8.0

9.5

0

3

5

8

10

13


%

INR

bn

Lighting revenue Operating margin (RHS)

DIXON



Mobile phones

Dixon has state-of-the art infrastructure with SMT and other testing equipment

coupled with strong manufacturing and quality team. Recently, it got approval under

government’s PLI scheme for manufacturing of mobile phones and has signed

Motorola and Nokia under the same. Currently, it has in house manufacturing

capability for key components including PCBA and further intends to manufacture

other components/accessories such as battery, chargers, plastic parts, etc.

Dixon is the first Indian mobile manufacturing company with capability to

manufacture 5G phones, and is in talks with global players for the same. This

segment contributed ~13% to FY21 revenue with an operating margin of 4.7% and

RoCE of 21%.

Key products: Feature phones, smartphones and PCBA for mobile phones.

Marquee clients in mobile phones




8.1

6.7

3.5

5.4

8.4

0.0

0.8

1.6

2.4

3.2

4.0

0.0

2.0

4.0

6.0

8.0

10.0


%

INR

bn

Mobile phones revenue Operating margin (RHS)


DIXON


Home appliances

In this segment, Dixon manufactures washing machines. It has a 1.2mn p.a. capacity

for semi-automatic washing machines, which is ~28% of the Indian market’s

requirement, as per the company. Backward integration within the segment

includes plastic moulding and other bought-out components such as motors, clutch

assembly and PCBA.

It has initiated the process of creating capacity to manufacture top-loading fully

automatic washing machines, and is expected to begin commercial production in the

current financial year with Bosch as an anchor customer. This segment contributed

~7% to FY21 revenue with an operating margin of 9.2%, RoCE of 21% and ODM share

of 100%.

Key products: Semiautomatic: 140 models ranging from 6–12kg. Fully automatic: 40

models ranging from 6–10kg.

Marquee clients in home appliances




8.0

10.0

12.0

14.0

16.0

18.0

0

1

2

3

4

5


%

INR

bn

Home appliance revenue Operating margin (RHS)

DIXON



Security Systems

Dixon entered this segment in 2017 through a JV with Aditya Infotech, which holds

the trademark for CP Plus and Dahua brands, and has ~30% market share in India,

as per Dixon. The current capacity is 8.4mn units p.a. in CCTVs and 1.8mn p.a. in

DVRs. This segment contributed ~3% to FY21 revenue with an operating margin of

2.8% and RoCE of 26%.



Other electronic manufacturing services: Set top box, medical

equipment, wearables

This segment includes manufacturing of set top boxes and medical equipment,

which Dixon entered into recently. In the wake of the pandemic, the company

entered manufacturing of Quattro Real Time Quantitative micro PCR Analyser

machines, which recently received ICMR approval to conduct covid tests. It has inked

an MoU with Molbio for manufacturing the same.

In the wearable electronics segment, Dixon collaborated with an international brand

to carry out a pilot order of 10,000 units.

Marquee clients catered to in STB business


0.0

0.8

1.6

2.4

3.2

4.0

0.0

0.5

1.0

1.5

2.0

2.5

FY19 FY20 FY21

%

INR

bn

Security systems revenue Operating margin (RHS)


DIXON


Reverse logistics

Through this vertical, Dixon offers repair/refurbishment services of LED TV, mobiles,

set top box, modems and computer peripherals. It is one of the few companies to

have a panel repairing facility and is the leading player to offer LED TV

refurbishment. In FY21, revenue from the segment was INR130mn with an operating

margin of 7.5%.

Marquee clients in reverse logistics




-13.0

-6.1

0.8

7.7

14.6

21.5

0

180

360

540

720

900


%

INR

mn

Reverse Logistics revenue

Operating margin (RHS)

DIXON



Management Overview

Mr. Sunil Vachani, Executive Chairman

Mr. Vachani is the promoter of the company. As Executive Chairman, he looks after

growth and business development. He has over 28 years of experience in the EMS

industry and holds a degree of Associate of Applied Arts in business administration

from the American College in London. He is also an executive member of CEAMA.

Mr. Atul B Lall, Managing Director and Vice Chairman

Mr. Lall has been associated with Dixon since inception looking after overall business

operations. He has over 25 years of experience in the EMS industry and holds a

master’s degree in Management Studies from Birla Institute of Technology and

Science.

Mr. Saurabh Gupta, Chief Financial Officer

Mr. Gupta has been with Dixon since August 2017, before which he was associated

with PVR as vice president. He has also worked with other reputed organizations

such as Gumberg India, Unitech and McKinsey and has over 15 years of experience

in finance and strategy. He is a Bachelor of Commerce from the University of Delhi

and an associate of the Institute of Chartered Accountants of India. He did Executive

MBA from MDI, Gurgaon.

Mr. Abhijit Kotnis, President and COO – Consumer Electronics & Reverse Logistics

Mr. Kotnis looks after the LED TV division as well as new projects. He has over 28

years of experience in various fields such as manufacturing, technology, business

development and sourcing. He has an MBA in Marketing & Operations and B.E. in

Electronics & Telecommunications from Marathawada University, Aurangabad and

has completed his Post-Graduate Programme in Management (MEP) from IIM,

Ahmedabad. Prior to joining Dixon, he was associated with Videocon Group for close

to three decades in various roles.

Mr. Vineet Kumar Mishra, President and COO – Lighting

Mr. Mishra heads the lighting division and has been with the company since 2004.

He has a Diploma in Electronics from the Board of Technical Education, Uttar

Pradesh. He has worked with Samsung India Electronics Limited, Hotline Witties

Electronics Limited and Onida Savak Limited, and has more than 20 years of

experience in electronics engineering.

Mr. Rajeev Lonial, President and COO – Washing Machine

Mr. Lonial is responsible for the home appliances vertical and has been with the

company since 2010. He has a Post-Graduate Diploma in Plastic Processing

Technology from the Central Institute of Plastic Engineering & Tools. He has worked

with Dipty Lal Judge Mal Private Limited, Noble Moulds Private Limited, Evershine

Moulding Private Limited, Ever Shine Plastic Industries, Essen Fabrication &

Engineering Co. Private Limited and Shree Krishna Keshav Lab Limited, and has

experience of more than 30 years in the field of plastics moulding.

Mr. Pankaj Sharma, President and COO – Mobile & Security devices

Mr. Sharma oversees operations of the mobile as well as security devices vertical.

He is a Bachelor of Arts from the University of Delhi, and has worked with Bigesto

Foods Private Limited, Satkar Exports, Bestavision Electronics Limited, Samsung Co.


DIXON


Limited, Jain Tube Company Limited and Shirllon Co. Limited. Mr. Sharma has a total

experience of close to 30 years in factory operations, manufacturing, supply chain,

global sourcing, and business development.

Dixon’s Board of Directors

Name Designation Date of first appointment

on the board

Mr. Sunil Vachani Executive Chairman 15th January, 1993

Mr. Atul B Lall Vice Chairman & MD 30th June, 2000

Mr. Manoj Maheshwari Non executive & Independent director 3rd May, 2017

Ms. Poornima Shenoy Non executive & Independent director 23rd February, 2017

Dr. Manuji Zarabi Non executive & Independent director 23rd February, 2017

Mr. Keng Tsung Kuo Non executive & Independent director 12th April, 2019

Dr. Rakesh Mohan Non executive & Independent director 2nd February, 2021


DIXON



Industry Outlook

Domestic supply chain capabilities: Making deeper inroads

The bulk of consumer electronics in India are imported, particularly LED TVs, mobile

phones, laptops and room AC components. China accounted for a lion’s share of

global consumer electronics market with >50% share of total USD422bn market for

consumer electronics (ex-mobile phones).

In the past few years, domestic market has seen grown rapidly in creation of local

supply chain, especially for room ACs and mobile phones—well complemented by a

significant policy push, be it PLI or hike in duty structures promoting local sourcing

for brands. The industry is expected to move from USD48bn (FY21) to USD70bn

(FY25) across consumer appliances/electronics (computers, mobile, laptops, large

home appliances, etc.). Rising import substitution and export potential peg the TAM

for Dixon far higher at ~USD50bn by FY25 (34% FY21–25E CAGR).

India’s electronics production on the rise…

Source: Meity, Edelweiss Research

…which has led to a 17% CAGR (5Y) growth in exports


0

18

36

54

72

90


USD

bn

Consumer electronics Industrial electronics Computer hardware

Mobile phones Strategic electronics Electronic components

LED products

80.0

82.0

84.0

86.0

88.0

90.0

0

1,080

2,160

3,240

4,320

5,400


INR

mn

Imports Exports Imports as a % of total


DIXON


Telecom instruments and electronic components among highest imported items from Electronics goods basket…

Source: CMIE, Edelweiss Research

…while also dominating exports


Import mix (FY21)


Export mix (FY21)


-5.0

0.0

5.0

10.0

15.0

20.0

0

1,000

2,000

3,000

4,000

5,000


%

INR

bn

Computer hardware & peripherals Consumer electronics Electronics components

Electronic instruments Telecom instruments Office equipments

Medical and scientific equipments YoY % RHS)

-12.0

0.0

12.0

24.0

36.0

48.0

0

200

400

600

800

1,000


%

INR

bn

Computer hardware & peripherals Consumer electronics Electronics components

Electronic instruments Telecom instruments Office equipments

Medical & scientific equipments YoY % (RHS)

Computer hardware & peripherals,

19%

Consumer electronics,

8%

Electronics component

s, 27%

Electronic instruments

, 13%

Telecom instruments

, 26%

Office equipments

, 0%

Medical & scientific equipments, 7%

Computer hardware & peripherals, 3%

Consumer electronics,

6%

Electronics components, 20%

Electronic instruments

, 23%

Telecom instruments

, 36%

Office equipments

, 1%

Medical & scientific equipments, 11%

DIXON



Indian TV market estimated at INR282bn expanding at 7% CAGR

Source: CRISIL, Edelweiss Research

WMs market at INR94bn, expanding at ~8% CAGR

Source: CRISIL, Edelweiss Research

Lighting market to benefit from rise in share of organised players


11.0

12.2

13.4

14.6

15.8

17.0

50

100

150

200

250

300

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21E

Mn

un

its

INR

Bn

TV India market size Volume (RHS)

1.0

1.7

2.4

3.1

3.8

4.5

0

20

40

60

80

100


Mn

un

its

INR

Bn

Semi-automatic WM market size Automatic WM market size

Semi-automatic WM volume (RHS) Automatic WM volume (RHS)

60.0

63.5

67.0

70.5

74.0

77.5

100

140

180

220

260

300


%

INR

Bn

India lighting market size Share of organised


DIXON


Exponential growth in mobile phones manufactured in India


Asia Pacific led by China is the world factory in consumer durables

Strong policy initiatives and favourable manufacturing landscape helped China scale

up CD manufacturing over the past two decades, reflecting in a strong 15–20% CAGR

in its CD industry, of which 55–60% is exported. Players such as Midea, Gree and

Haier represented China’s dominance in the global supply chain with 50%+ collective

share.

Meanwhile there has been an increasing intensity of the shift in global supply chain

in recent years away from China, triggered by covid-led disruption. This led to a

favourable shift in market dynamics for the next set of emerging players, including

Malaysia, Thailand, Indonesia and India.

China dominates global electronics manufacturing industry

Source: Statista, Edelweiss Research (Note: data for 2016)

Haier — A financial snapshot (USD mn)

Particulars 2015 2016 2017 2018 2019 2020

Revenue 14,228 17,940 24,211 27,854 29,068 30,424

EBITDA 897 1,283 1,972 2,031 2,015 2,310

EBITDA % 6.3 7.2 8.1 7.3 6.9 7.6

ROCE % 12.3 10.9 10.8 10.4 11.7 10.7


0

80

160

240

320

400

0

500

1000

1500

2000

2500

FY15 FY16 FY17 FY18 FY19 FY20 FY21E

Mn

un

its

INR

bn

Mobile phones (INR bn) Units (mn) (RHS)

China51%

US19%

Japan10%

South Korea6%

Germany4%

Great Britain3%

France2%

India2%

Brazil2%

Russia1%

DIXON



Haier – Segment mix


Midea – A financial snapshot (USD mn)

Particulars 2015 2016 2017 2018 2019 2020

Revenue 22,031 24,070 35,839 39,611 40,451 41,451

EBITDA 2,517 2,803 3,855 4,313 4,799 4,624

EBITDA % 11.4 11.6 10.8 10.9 11.9 11.2

ROCE % 19.3 18.4 15.8 14.6 15.5 14.5


Midea – Segment mix


Gree – A financial snapshot (USD mn)

Particulars 2015 2016 2017 2018 2019 2020

Revenue 15,885 16,582 22,225 30,262 29,032 24,736

EBITDA 2,194 2,346 4,172 4,995 4,536 3,927

EBITDA % 13.8 14.1 18.8 16.5 15.6 15.9

ROCE % 20.6 22.6 27.2 24.6 18.6 14.6


Overseas home appliances, 47.7

Refrigerators, 14.6

Washing Machines, 10.7

Others, 10.6

Acs, 10.4

Water heater, 4.7

Kitchen & Bath, 1.3

Heating, Ventilation & AC, 46.4

Consumer appliances, 43.6

Robot & Automation system, 8.3

Others, 1.8


DIXON


Gree – Segment mix


PLI for Electronics ecosystem; to drive local supply chain…

The government recently notified several segments such as room ACs, mobile

phones and LED under the PLI scheme, which has attracted a large number of

participants. While the jury is still out w.r.t. how effective the PLI scheme will be,

most players (brands, ODMs) believe it is reasonably attractive given local/global

potential over the next few years.

PLI scheme for manufacturing of mobile phones in India – A brief overview

Segment Proposed incentive rate Incremental investment over base year Incremental sales of manufactured

goods over base year

Mobile phones ( Invoice value

of INR15,000 and above)

Year 1: 6%

Year 2: 6%

Year 3: 5%

Year 4: 5%

Year 5: 4%

INR10bn over 4 years

Cumulative minimum Year 1: INR40bn

Year 1: 2.5bn Year 2: INR80bn

Year 2: 5bn Year 3: INR150bn



Mobile phones (Domestic

companies)

INR2bn over 4 years






Specified electronic

components

INR1bn over 4 years




Year 3: 0.75bn Year 4: INR4.5bn


Source: Meity,, Edelweiss Research

AC & Parts manufacturing,

70.1

Other household appliances,

22.5

Others, 4.3

Small household appliances, 2.7Intelligent

equipment, 0.5

DIXON



Approved list of companies for mobile phone PLI in India

Company Country Category

Samsung South Korea Mobile phones

Foxconn Honn Hai Taiwan Mobile phones

Rising Star Taiwan Mobile phones

Wistron Taiwan Mobile phones

Pegatron Taiwan Mobile phones

Lava India Mobile phones

Bhagwati (Micromax) India Mobile phones

Padget Electronics India Mobile phones

UTL Neolyncs India Mobile phones

Optiemus Electronics India Mobile phones

AT&S Austria Specified electronic components

Ascent Circuits India Specified electronic components

Visicon USA Specified electronic components

Walsin Taiwan Specified electronic components

Sahasra Electronics India Specified electronic components

Neolync Israel Specified electronic components

Source: Pib.gov.in, Edelweiss Research

PLI scheme for manufacturing of LED lights in India (INR mn) – A brief overview

Segment Year PLI Min. Cumulative Incremental

Investment

Min. Incremental

sale Min. PLI

Min. Cumulative

Incremental

Investment

Min. Incremental

sale Min. PLI

Large Investment Normal Investment

LED Lights (Core

components)

FY22 1,000 - - 200 - -

FY23 6% 1,500 6,000 - 400 1,200 -

FY24 6% 2,000 9,000 360 600 2,400 70

FY25 5% 2,500 12,000 540 800 3,600 140

FY26 5% 3,000 15,000 600 1,000 4,800 180

FY27 4% - 18,000 750 - 6,000 240

FY28 - - 720 - - 240

Total 3,000 60,000 2,970 1,000 18,000 880

Components of

LED lights

FY22 50 - - 20 - -

FY23 6% 100 300 - 40 120 -

FY24 6% 150 600 20 60 240 10

FY25 5% 200 900 40 80 360 10

FY26 5% 250 1,200 50 100 480 20

FY27 4% - 1,500 60 - 600 20

FY28 - - 60 - - 20

Total 250 4,500 220 100 1,800 90

Source: DPIIT, Edelweiss Research

Note: LED Lights: (Core Components like LED Chip Packaging, Resisters, ICs, Fuses and large scale investments in other components etc.

*Components of LED Lights: LED Chips, LED Drivers, LED Engines, Mechanicals, Packaging, Modules, Wire Wound Inductors and other components.


DIXON


PLI scheme for manufacturing of telecom and networking products in India – A brief overview

Year

Proposed Incentive

rate on incremental

sales

Cumulative Investment (other than land & building)

Min. Incremental sales of

manf. Goods net of taxes

over the base year

Max. Eligible sales of manf.

Goods net of taxes over the

base year

MSMEs - Minimum threshold of Investment INR100mn

1 7% Greater than or equal to 20% of X 3x(20% of X) 20x(20% of X)



4 5% Greater than or equal to X 3xX 20xX

5 4% 3xX 20xX

Other than MSMEs - Min. threshold of Investment INR1bn




4 5% Greater than or equal to X 3xX 20xX

5 4% 3xX 20xX

Source: DOT, Edelweiss Research

(Note: X = Committed Total Investment by the company / entity over a period of four years starting from year 2021-22 (min. INR100mn for MSMEs

and INR1bn for others)

PLI scheme for manufacturing of IT hardware in India – A brief overview

Category Proposed incentive rate Incremental Investment after

31st March 2021

Net incremental sales of manf.

Goods over base year

IT hardware companies

1) Laptops (invoice value of INR30,000 and above)

2) Tablets (invoice value of INR15,000 and above)

3) All in one PCs

4) Servers Year 1 - 4%

Year 2 - 3%

Year 3 - 2%

Year 4- 2%/1%

INR5bn over 4 years Cumulative

min.

Year 1 - INR0.5bn

Year 2 - INR1.5bn

Year 3 - INR3bn

Year 4 - INR5bn

Year 1 - INR10bn

Year2 - INR25bn

Year 3 - INR50bn

Year 4 - INR100bn

Domestic companies

1) Laptops

2) Tablets

3) All in one PCs

4) Servers

INR200mn over 4 years

Cumulative min.

Year 1 - INR40mn

Year 2 - INR80mn

Year 3 - INR140mn

Year 4 - INR200mn

Year 1 - INR0.5bn

Year2 - INR1bn

Year 3 - INR2bn

Year 4 - INR3bn


DIXON



Application status of companies under IT hardware PLI

Company Country Segment Application status

Dell USA IT hardware Approved

ICT (Wistron) IT hardware Approved

Flextronics Singapore IT hardware Approved

Rising Stars Hi-Tech Taiwan IT hardware Approved

Lava India IT hardware

Dixon India Domestic company Approved

Infopower (JV of Sahasra & MiTAC) India Domestic company Approved

Bhagwati (Micromax) India Domestic company Approved

Syrma USA Domestic company

Orbic USA Domestic company

Neolync Israel Domestic company Approved

Optiemus India Domestic company Approved

Netweb India Domestic company Approved

VVDN India Domestic company Approved

Smile Electronics India Domestic company Approved

Panache Digilife India Domestic company Approved

HLBS India Domestic company

RDP Workstations & Coconics India Domestic company

Lava India Domestic company Approved

Source: Pib.gov.in, Edelweiss Research


DIXON


Additional Data Management

Exec. Chairman Sunil Vachani

VC & MD Atul B. Lall

CFO Saurabh Gupta

CS, Hd. Legal & HR Ashish Kumar

Auditor M/s S.N. Dhawan & Co. LLP

Holdings – Top 10* % Holding % Holding

Nippon Life Ind 2.40 Rbc Asia Pacifi 1.00

Vanguard Group 2.05 Royal Bank Of C 1.00

Steadview Capit 2.02 Ameriprise Fina 0.76

Icici Prudentia 1.73 Blackrock Inc 0.75

Life Insurance 1.05 Sbi Funds Manag 0.73

*Latest public data

Recent Company Research Date Title Price Reco

Recent Sector Research Date Name of Co./Sector Title

07-Sep-21 Polycab India Changing perceptions; potent levers; Company Update

06-Sep-21 Consumer Durables CD loans: Structural trend unfolding; Sector Update

18-Aug-21 KEI Industries Ambitious, but relevant transformation; Company Update

Rating Interpretation

Source: Bloomberg, Edelweiss research

Daily Volume

Source: Bloomberg

Rating Distribution: Edelweiss Research Coverage

Buy Hold Reduce Total

Rating Distribution* 176 54 19 250

>50bn >10bn and <50bn <10bn Total

Market Cap (INR) 227 40 3 270

*1 stocks under review

Rating Rationale

Rating Expected absolute returns over 12 months

Buy: >15%

Hold: >15% and <-5%

Reduce: <-5%

350

1210

2070

2930

3790

4650

Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Apr-21

(IN

R)

DIXON IN EQUITY Buy Hold Reduce0

2

4

6

8

10

Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Apr-21

(Mn

)

DIXON



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This Report has been prepared by Edelweiss Securities Limited in the capacity of a Research Analyst having SEBI Registration No.INH200000121 and distributed as per SEBI (Research Analysts) Regulations 2014. This report does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 includes Financial Instruments and Currency Derivatives. The information contained herein is from publicly available data or other sources believed to be reliable. This report is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in Securities referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors.

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Analyst Certification:

The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

http://www.nseindia.com/


DIXON


Additional Disclaimers

Disclaimer for U.S. Persons

This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.

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Disclaimer for U.K. Persons

The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Disclaimer for Canadian Persons

This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.

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In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.

Disclaimer for Hong Kong persons

This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so. Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.

Aditya Narain

Head of Research

[email protected]

Date post:	30-Jan-2022
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