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Dixon Technologies: Strong prospects, high valuations

The company has negligible debt and positive cash flow helps it fund expansions

Business Standard 

A representative image of consumer durables
A representative image of consumer durables

is an electronic services (EMS) company, which makes consumer durables, lighting products and for brands like Phillips, and  

About 78 per cent of its revenue comes from the original equipment manufacturers (OEM) business (supplies to big brands), while its original design (ODM) business contributes the rest. In the ODM business, the company designs lighting products, light emitting diode televisions and semi-automatic

The prospects for the company are strong, as the OEM/ODM sector, according to Frost and Sullivan, is expected to grow annually by 31 per cent over FY16-21. While OEM continue to be a major source of DTL revenue, the company has gradually increased the proportion of ODM to 22 per cent in FY17, from 14 per cent in FY13. The company has leadership in the of flat-panel displays (FPD) TVs, washing machines, and CFL lights in India in FY16. 
Given its leadership in various categories and higher volumes, the company has delivered annual growth of 33.8 per cent, operating profit of 44 per cent and net profit growth of 78 per cent over the past five years.

The company has negligible Positive cash flow helps fund expansions. is raising fresh to pay off some of its debt, set-up a unit in Tirupati, enhance its backward integration capabilities in the lighting product vertical at the Dehradun facility and upgrade its infrastructure.

While Centrum Broking has an avoid recommendation given the low operating profit margins (3.7 per cent), high valuation, high offer for sale portion, analysts at Angel Broking have a ‘subscribe’ recommendation on expectations of higher revenue growth, improving margins, robust and negligible post  

Compiled from  research reports

First Published: Wed, September 06 2017. 00:23 IST