Hold Dixon Technologies; target of Rs 4500: Emkay Global Financial
Emkay Global Financial recommended hold rating on Dixon Technologies with a target price of Rs 4500 in its research report dated July 28, 2021.
August 02, 2021 / 11:07 AM IST
Emkay Global Financial's report on Dixon Technologies
Despite Covid-related disruptions, TV revenues performed well in Q1, with an 11% qoq rise. Revenue and margin for Lighting and Washing machine categories were adversely impacted. EBITDA beat was driven by lower other opex/ employee expense. Gross margin contracted by 273bps qoq, which can be attributable to lower cost absorption and commodity headwinds in ODM-focused business segments, where entire impact of commodity inflation was not passed-on to the customers. With strong order book visibility across business segments, management was confident about revenue recovery from Q2, along with a rebound in margins. To avoid any production delays, it has accumulated inventory for select components.
We cut FY22E revenue/EBITDA by 7%/12% due to the Q1 revenue loss. We believe that after multi-fold stock price returns and a 61% EPS CAGR over FY21-24E, current valuations limit upside. Downgrade to Hold with a TP of Rs4,500 (45x Sep’23E EPS).
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