Dixon Technologies Concall was today at 4.15 PM.

Here are highlights of the Conference Call

@drprashantmish6 @AnyBodyCanFly @amey_candor

Opening Remarks:

- Revenue growth of 17%

- Editda margins have increased from 4.4% to 5.5% due to productivity improvement and cost efficiencies

- Margin expansion in all the product categories

- There has been a reduction in finance cost

- Extremely healthy order book

- Adequate working capital and liquidity.

- Consumer durable sold in India would be made in India and Dixon is sitting on a sweet spot

- Focus more on backward integration to increase margin and stickiness to customers

- In Led tv Strong growth of 30%.

- In order to meet requirements of newly acquired customer like Samsung, Toshiba, nokia the company is expanding the capacity to 5.5 millions sets

- Company is strengthening the R&D and partnership with strong teams.

- VU tv has been the new customer the production will start in November.

- Oneplus has also been acquired as a new customer

- operating profit growth is of 27%.

- largest ODM in bulbs.

- Company is now globally competitive and has the unique cost advantage among its competitors

- Home appliance: Highest ever sales in this segment. presently 140 models In Q3 new models will be launched.

- In washing machine vertical they have a target of localization as the imports are going to decrease.

- Mobile phones: Operating margins has expended. Largest manufacturer of it.

- Company is largest manufacturer of 2g models mobile in India

- Company has very strong order book in terms of smartphones

- numbers of Q3 and Q4 will be better than Q2.

- Under PLI scheme of government, company has got the approval of 41000 crore over next 5 years.

-Domestic companies will be incentivized in manufacturing of mobile model under Rs.15k

- Company has taking a factory on lease for new capacity which will be ready by early Q4. It will be used for supplying to 3 large global brands to cater the demand of domestic & global market

- Company will increase the manufacturing of smartphone capacity to 16 millions unit by early Q4.

- Company is confident to generate revenue of 30k crores with good margins.

- Set up box: 0.3 million per month order book. Company has strong order book with customers including Reliance jio and siti cable

- Security surveillance system: de-growth in this segment. However due to increase in margin the profits has increased slightly.

- Reverse logistics includes both refurbishment of led tv and security surveillance system.

- There was a challenge in supply chain. there was a delay in custom clearance and ports by 12-15 days. this has put a pressure on working capital. But this will correct by quarter 3.

- TV has been put into restrictive but open cell panels have not been put into restrictive list.

- PLI scheme the strategy is to focus more on scaling than on the margins

- Revenue from set up box is 35 crore. Medical electronics revenue is 96 lacks and margin is 20%

- Margins in the mobile phones has expanded because of the anchor customer acquired for the manufacturing of 2g phone

- Electronic Tv demand from new customers (oneplus and vu) will have indicative volume of around 0.8-0.9 million tv per annum.

- Company is fairly confident to reach the revenue target and the margins will be around 3% under PLI scheme

- Import restriction is still to play out. The dip in sales after Diwali festival won't be there because it would be substituted by import restrictions.

- washing machine:

company is starting a new facility for top load and already has a contract signed with a customer. They will roll out the sample product by end of November. Revenue will start flowing in by Q4 but it will take some time to scale up.

- PLI scheme; the 3 customer that the company is in talks with, those customer would be able to suffice the ceiling limit.

- In mobile segment the path for the company is to move from OEM to ODM

- Infrastructure is fungible in smart phone, set up box and medical devices.

- Top most customer contribute 30-32% to revenue an 14% to profit.

-17% is the contribution of 2nd biggest player in Revenue.

- Ratio of 1:3 in manufacturing of smartphone in case of smart phones and 2g phones, for every one smartphone three 2g phones are manufactured

- Capacity utilization of various segments:
lighting: 81%
LED tv: 71%
Home appliance: 83%
Mobile 2G: 68%
Smart phone: 35%
Security system: 36%

-ODM share in consumer electronics is only 3%
And home appliance is around 90%. If company is able to crack the ODM in smart phone then a significant portion of revenue will come from ODM segment.

- Aspire to become one of the leader ODM manufacturer in Smartphone.

- ODM share has been significant in home appliance. For LED tv the company is ready for solution in smart models

- In smart phone first step would be to work with Qualcomm & mediatek to strengthen the supply chain.

- On refrigerator side the team is led by experienced people

- Both in lighting and washing machine the margin is dependent on Value engineering, continuous cost reduction and commodity prices.

- lighting business margin will be around 8-9 %

- operating margin in washing machine will be around 10-12.5%

- Set up Box:
In Set top box the order book looks healthy around 3 lac units. Margins would be around 3%. ROCE will be better because of usage of existing capacity. In H2 the company would be generating revenue business of around 450 crores

- Expansion of Ac segment is on cards.

- Daikin partnership for AC segment. The revenue was around 30 crore in this quarter with margins of 3%

- TV segment ODM:
The product of brands like Reliance, Intex Lloyd is of Dixon solution

- Dixon is in talks with Google for smart solution in Android side of television

-Open cell prices have risen in TV segment but in this segment the cost are passed on to customer so there is no problem for company on rise of such prices.

- TV sales have been around 960 crores September month was better than August and August was better than July thus both debtors and creditors have increased.

- Debtor days are around 58 days

- Inventory cycle has come down to 26 days compared to 50 days
- Debtors have increased due to the increase in sales in TV. these numbers will come back to normal.

And creditor days have come down to 83 days from 94 days

- PLI scheme the customer will ne reimbursed only when the company receives the incentives from the government

-For meeting eligibility criteria there should be confirmed capex of 50 crores

- Second threshold criteria should be met then the application has to be filed on quarterly basis to project agencies

- Lighting segment; the goal to reach the market share from 30% to 45% can be achieved by next year or the year after

- Capex of 50 crores every year in PLI scheme

- Fully automatic washing machine 70 crores Capex

- Other verticals the average run rate would of 20 crores.

Refer our recent FY 2021 Concalls here https://thetycoonmindset.com/finance/conference-call-updates-twitter-thread-q2-fy-2020/