Emkay Global Financial has given Hold recommendation for Dixon Technologies with a target price of Rs. 3860 in its research report issued on Jul 27, 2022

Emkay Global Financial’s research report on Dixon Technologies

Dixon’s Q1FY23 revenue/EBITDA missed our estimates by 7%/15%. The sharp fall in the TV realizations led to 30% yoy revenue decline. Forex loss of Rs120mn dented operating performance. EBITDA margin was 3.5% vs. 4.0% in Q4FY22. The washing machine segment continued to deliver strong topline growth, driven by new customer wins and higher wallet share from an anchor customer. Though margin print should improve from Q2, the full benefits of benign commodity prices should reflect in Q3. In the wake of the macro weakness, management has lowered FY23 volume guidance for TV to ~3.6mn from 4mn. While the slowdown in the lighting segment has led to a 7% cut in FY23 topline. Management expects revenue normalization in lighting to start from Q4.

Outlook

We reduce our FY23-25 revenue estimates by 4-11% with higher cut in TV and non-mobile PLI revenue for FY23. We also lower our EBITDA assumptions for the same period by 3- 11%. Maintain Hold with a revised Jun’23 TP of Rs3,860 (41x Jun’24E EPS).

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