Company Analysis: Dixon Technologies
Dixon Technologies Limited is one of the favourite stocks of retail investors as it has given enormous returns in the previous years. But do you know what their business is? Why do you never see their products being sold in a store even though they are said to make TVs, mobiles etc? Let's jump in straight to analyse what the company is all about and what we can understand from their financials.
Company Profile - Dixon
Dixon Technologies (India) started manufacturing colour television in 1994 and slowly expanded its operations to various segments of electronics. The company was founded in 1993. Currently, it deals in manufacturing consumer durables, home appliances, lighting, mobile phones and security devices. They have 14 State-of-the-art manufacturing facilities and three R&D centres in India and China. These manufacturing sites are located in Uttar Pradesh, Uttarakhand and Andhra Pradesh.
It provides design-focused solutions in consumer durables, lighting, mobile phones and security devices. In fact, they are the leading electronic manufacturing services (EMS) company in India. They already have a strong market hold in the smartphone segment even after starting the manufacturing in 2016 only. Not only smartphones, but they are also setting up in-house units to manufacture key components of the device like batteries and sheet material.
In 2020, they took another step to expand their reach by stepping into the manufacturing of medical equipment. They started making Quattro Real-Time Quantitative micro PCR Analyzer machines that can conduct 190-200 tests per day. This product was approved by the Indian Council of Medical Research (ICMR) for conducting Covid-19 tests.
The much-awaited share split
A stock that is trading at Rs 200 or Rs 2000 will have much higher liquidity as compared to a stock trading at Rs 20,000. A high percentage of retail investors will find it tough to invest in a stock that is trading at such a high price. You can compare it with an IPO. Generally, the minimum amount you need to invest in an IPO is Rs 15,000. You get a number of shares by investing Rs 15,000.
In comparison to that, you won't even get one share with that amount if Dixon was still traded at around Rs 20,000. Thus, many retail investors shy away from investing in these stocks as they are afraid that their capital will get stuck. To investor's delight, Dixon announced a 1:5 Stock Split a few weeks back which brought it around the Rs 4,000 mark. It experienced a bit of correction which might have frightened some of the retail investors but it is back in the strong zone which tells that was just a momentary dip.
I failed to hide my delight but the finances are just so healthy that I have a great smile on my face. From 2012 to 2021, their revenue has increased massively. In 2012, they had a total sales of Rs 573 crore and in 2021, they recorded it worth Rs 6449.75 crore! Over the past five years, total revenue has grown at a yearly rate of 30%. You might think that this might be only because of a boom in the whole industry. But the industry grew by only 14% in the same period.
Coming to the profits, it was recorded to be Rs 11 crore in 2015. After 6 years, in 2021, the net income is amassed to be Rs 159.80 crore. The yearly growth rate in profits in the last five years is mighty Rs 60%! How great does that sound? All of this success has been due to their increasing market share. In the past half-decade, their market share has increased by almost 5X times, from 2% to around 10%.
Earnings per share (EPS) is another pivotal metric for shareholders. In FY19, the EPS was Rs 11.19 and in FY21, this has zoomed up to Rs 27.49. At the beginning of the article, we termed Dixon as "one of the favourite stocks of retail investors". The reason is that retail investors hold 35% of the stake in the company, joint-highest with a stake which is held by the promoters. From March 20 to March 21, the foreign institutions have almost doubled their stake from 10.76% to 19.84%.
The automatic beneficiary of government schemes
The Indian government is keen to bolster its manufacturing capacity. They want to improve their trade balance. For that to happen, they are eager to cut imports by building their goods in India itself. Many initiatives like PLI Schemes and Make-in-India have given these companies a space to grow which is beyond one can imagine.
For example, the Indian smartphone market is the second-largest smartphone market across the world. If the Indian government is incentivising foreign companies to manufacture here, companies like Dixon will benefit directly. Dixon manufactures not only a smartphone but TVs, washing machines and several consumer electronics in India. The scope of growth is huge, but can Dixon remain on the right path and continue to work tirelessly?
Have you enjoyed a rally in Dixon previously? Is this stock in your portfolio currently? Do make your own analysis before investing and let us know your insights on Dixon in the comments section of the Marketfeed application. Until next time!