DIXONNSEQ4 FY 2022May 30, 2022

Dixon Technologies (India) Limited

9,072words
56turns
5analyst exchanges
3executives
Management on call
Atul Lall
VICE CHAIRMAN AND MANAGING
Saurabh Gupta
CHIEF FINANCIAL OFFICER,
Naval Seth
EMKAY GLOBAL FINANCIAL
Key numbers — 40 extracted
60 bps
ended March, 2022. We are very pleased to report a strong performance in the fourth quarter with a 60 bps improvement in operating margins sequentially. So as we have been guiding on the earning call, so
3.4%
lly. So as we have been guiding on the earning call, so our operating profit margins improved from 3.4% in Q3 to 4% in Q4. And this has been on account of operating leverage and continuous improvement i
4%
have been guiding on the earning call, so our operating profit margins improved from 3.4% in Q3 to 4% in Q4. And this has been on account of operating leverage and continuous improvement in the cost
INR 2,953
l performance for the quarter four, our consolidated revenues for the quarter ended March 31st was INR 2,953-odd crore as against INR 2,110-odd crore. So, which is a growth of 40-odd percent. Our EBITDA for
INR 2,110
our, our consolidated revenues for the quarter ended March 31st was INR 2,953-odd crore as against INR 2,110-odd crore. So, which is a growth of 40-odd percent. Our EBITDA for the quarter was one INR 120-od
INR 120
t INR 2,110-odd crore. So, which is a growth of 40-odd percent. Our EBITDA for the quarter was one INR 120-odd crore as against INR 81 crore in the same period last year, which is a growth of 49-odd percen
INR 81 crore
ich is a growth of 40-odd percent. Our EBITDA for the quarter was one INR 120-odd crore as against INR 81 crore in the same period last year, which is a growth of 49-odd percent. And our PAT for the quarter w
INR 63 crore
the same period last year, which is a growth of 49-odd percent. And our PAT for the quarter was INR 63 crore as against INR 44 crore in the corresponding period previous year, which is a growth of again 43-o
INR 44 crore
ar, which is a growth of 49-odd percent. And our PAT for the quarter was INR 63 crore as against INR 44 crore in the corresponding period previous year, which is a growth of again 43-odd percent. Now I woul
INR 1000
t me start with consumer electronics. So in this vertical, the revenues for the quarter was almost INR 1000-odd crore with an operating profit of INR 28 crore. And there's a sequential a Q-on-Q improvement
INR 28 crore
s vertical, the revenues for the quarter was almost INR 1000-odd crore with an operating profit of INR 28 crore. And there's a sequential a Q-on-Q improvement of 60 bps in operating margins to 2.8% as against
2.8%
t of INR 28 crore. And there's a sequential a Q-on-Q improvement of 60 bps in operating margins to 2.8% as against 2.2% in Q3. In the current quarter, within this INR 1000 crore, the revenues of AC PC
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Guidance — 20 items
Saurabh Gupta
opening
“As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions at the end of today's presentation.”
Saurabh Gupta
opening
“Now I would like to share the performance and strategy in each of the verticals going forward.”
Saurabh Gupta
opening
“And we expect significant volumes from that brand in the current financial year.”
Saurabh Gupta
opening
“We expect that LD volumes this year should grow by another 40% mainly on account of this big order win and from the 3 million sets that we‟ve closed in FY‟22-„23 and we should see further improvement in margins or the margins should be almost similar to what we have reported.”
Saurabh Gupta
opening
“The expected volumes this year should be in the range of around 0.5 million and we expect that the order book should significantly increase in the coming years.”
Saurabh Gupta
opening
“We are also a beneficiary of the LED lighting components and we have made a subsidiary to do that business, which is Dixon Technologies Solutions Private Limited in line with the backward integration strategy and we will be making our investments in the first year from INR 20 crore this year and overall investment in this five-year period is to the tune of INR 100-odd crore.”
Saurabh Gupta
opening
“Now we are further expanding the capacity and taking the capacity in washing machine to 2.4 million and our additional infrastructure footprint in Dehradun will be ready in next couple of months to meet the increased demand ahead of the festive season.”
Saurabh Gupta
opening
“So here, of course, in the mobile business, our anchor customer is Motorola and that business is now completely ramped up and stabilized with monthly volumes touching almost 4 lakhs and we have a strong order book from 1.5 million in Q2 this fiscal and that will be both for domestic and export markets.”
Saurabh Gupta
opening
“The expected monthly volumes once stabilized will be almost half a million per month.”
Saurabh Gupta
opening
“So refrigerators, now we will be creating a capacity of almost 1.2 million direct cool category, which will be ultimately expanded to frost-free category as well.”
Risks & concerns — 2 flagged
Again, this has been possible because of the passing on of the impact of commodity cost to the consumers to our principal customers on account of the improved operating leverage, and also on accountable cost optimization measure.
— Saurabh Gupta
So any thought, I mean, reconciliation seems a bit difficult to me, so you can explain on that.
— Saurabh Gupta
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Q&A — 5 exchanges
Q
Our first question is from the line of Bhoomika Nair with DAM Capital. Please go ahead. Yes, good evening, sir. Thanks for the opportunity and congratulations on a good set of numbers. So just want to understand the mobile business a little better given that we are looking at a very sharp ramp up. If you can just talk about what is the kind of ramp up that we are looking on Motorola specifically, how was being the exit in March and how is it scaling up right now? And if you can also talk about Samsung given that they're looking to scale down their feature phone business as well? Dixon Technolo
Atul Lall
So Bhoomika, as I mentioned in the remarks, so clearly our volumes with Motorola are ramping up and they've already touched closer to a level of 4 lakhs and we have an order book with Motorola for almost 1.5 million in next quarter, and we expect that the monthly volume should go to around 5 lakhs for us. So clearly the ramp up is happening at a faster pace now. And we are expecting that as against INR 3000 crore revenue that we have done in the mobile and EMS division out of which a significant portion has come from mobile business. Our mobile business in itself this is fiscal year should tra
Q
Yes. Hi. Good evening, sir. Sir, my first question is with respect to the incentive share out from mobile, how is the process in terms of the cash reimbursements coming in from the government? So are these largely in terms of duty payouts or cash reimbursements and by when do we actually see the payout or the incentive payout materializing for us?
Atul Lall
Saurabh, would you like to take that or I respond? So Reno, as I mentioned, so we have already filed our incentive claim. We are the first company to actually achieve the revenue and capex investment thresholds. So the way it works is there's a project management agency, which is IFCA in this case. Comment your factors, they'll audit those numbers, appraise the entire workings and then they present the report to Ministry of Electronics. As far as our case is concerned, so that part has already been done and the report has already been submitted to Ministry of Electronics. Now the next step in
Q
Yes. My question was mainly regarding the balance sheet. If you can see there is a significant increase in the long-term borrowings, and the net debt has also increased. So what is the comfortable level for the management in terms of debt to equity debt to EBITDA? You're absolutely right. Our debt levels are increased because we have done a capex of almost INR 400 crore this year and that is there to increase in debt. But even if you look at the balance sheet, our balance sheet still continues to be stronger. And there's enough cushion. If you look at our net debt to equity level, it's still 0
Onkar Ghugardare
So the debt to equity would remain at the same level you are saying, or it would gradually increase in the coming years? My sense is it'll not go up. It should broadly be in the similar range plus minus something. Yes. But broadly it should be in the similar range. Okay. And as far as the EBITDA margin is concerned, you said that you would be doing around 4% to 4.25%, right for the upcoming fiscal? Yes. That's the broad guidance. Okay. And Dixon‟s next 3-4 years, if you look at it, so where would the majority of the contribution can come from? Mostly, it would be from mobile phones, but apart
Q
Yes. With the kind of debt levels you are setting on, would you be looking to raise in equity?
Atul Lall
No. We are not. No. We feel confident that it can be easily done, safely done from the internal accruals of the company. So whatever capex plans we have, it can be done from the internal accruals. So we have no plans to raise an equity. Okay. And as far as the AC business is concerned, can you elaborate bit more on that as we are not the front runners in the AC business. So are you looking to expand that business more or are you comfortable with the current levels? No, we have absolutely no plans to get into the AC business. So there's so much on the plate right now. The idea is to focus and c
Q
Yes. With 22% ROE and almost 25% ROC, what kind of scope do you see for this expansion in all those verticals?
Saurabh Gupta
Yes, so historically, if you look at, we have been maintaining a 30% plus kind of an ROC and 24% plus kind of an ROE. We will work towards it to going back to those levels. Now, what has happened in the year that we have just concluded FY ‟21-„22, we have done a capex of INR 400 crore and in this current year, we are looking at a capex of INR 340 crore. So a lot of the capex has been front-ended as far as last year is concerned, or this year is concerned. And the new verticals are of course the fully automatic, the telecom, the Boat, they will start to deliver optimal revenues and profitabilit
Speaking time
Saurabh Gupta
17
Atul Lall
12
Onkar Ghugardare
11
Moderator
6
Renu Baid
3
Sonali Salgonkar
3
MODERATOR
1
Bhoomika Nair
1
Pulkit Patni
1
Dhruv Jain
1
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Opening remarks
Saurabh Gupta
Ladies and gentlemen, welcome to the Q4 and FY „22 results conference. Call of Dixon Technologies hosted by Emkay Global Financial Services. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference, please signal an operator by pressing „*‟ then „*‟ on your touchtone phone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Naval Seth, Emkay Global Financial Services. Thank you, and over to you, sir. Thank you, Peter. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. We have with us today, Mr. Atul Lall, Vice Chairman and Managing Director; and Mr. Saurabh Gupta, Chief Financial Officer. I shall now hand over the calls to management for their opening remarks. Over to you, Saurabh. Yes. Good evening, everybody. Good evening, ladies and gentl
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