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Yes Securities
Dixon Technologies (Buy)
Target ₹11,056
CMP: ₹8,826.35
Dixon Technologies, India’s largest EMS player is currently in a sweet spot given a confluence of rising demand, import substitution and favourable regulatory support at the same time. The company is preparing for aggressive scale up across product segments by investing in increasing management bandwidth, adding export markets as a key growth engine and continuously increasing the value addition in products like lighting, washing machines and now televisions.
Fungible capacities, backward integration, focus on ODM solutions vs OEM and continued addition of MNC clients have been key growth enablers behind driving a 30 per cent revenue and 56 per cent PAT growth over FY15 20. Further, an asset light balance sheet, low WC cycle, disciplined capital investments with 18 months payback make it an attractive and scalable business.
After establishing a dominant presence in lighting, company is eyeing a similar positioning in TVs, WMs and mobiles. High asset turns and low capex requirement should take ROCE above 40 per cent despite an expected revenue and PAT CAGR of 35 per cent/39 per cent over FY20 -25.
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