Dixon hits 52-week low before closing 19.19% down on poor Q3 show

Cuts FY23 guidance, but expects sales to improve in FY24

Shares of Dixon Technologies (India) shed about 22 per cent intraday and hit a 52-week low of Rs 2,673.05 on Friday after the company reported disappointing results for the December quarter (Q3FY23). At close, the stock was down 19.19 per cent.

Revenues declined 22 per cent year on year (YoY) to Rs 2,405 crore in Q3FY23, due to slower ramp up in the mobile segment and a muted show in consumer electronics and lighting businesses. The revenues of these segments fell 39 per cent each from the year-ago quarter.

The sluggishness in mobile segment sales was on account of weak exports of Motorola handsets and lower festival demand. Lower realisation in LED televisions led to a revenue dip in the consumer electronics segment.

Another reason for the negative stock reaction was the cut in management guidance. The management slashed FY23 sales guidance to Rs 12,200-Rs 12,700 crore, from Rs 14,000-Rs 15,0000 crore a few months earlier. Sales guidance for FY23 at the start of the year was Rs 17,000-Rs 18,000 crore. The cut was due to weakness in the mobile segment and sluggish demand, in addition to falling realisations in other major divisions.

Analysts at Emkay Global Financial Services believe the slowdown in some key segments is hampering the overall growth of brands, with additional impact on account of Dixon being a business-to-business supplier.

 

“In the past one year, the Street has cut FY23 earnings per share (EPS) by over 30 per cent owing to lower sales. We have cut our FY23-FY25 EPS by 16-20 per cent largely on account of lower sales, while margin remains at around 4 per cent,” the brokerage firm said.

Sales ramp-up remains the key monitorable going forward. Risks include slowdown leading to lower requirements by brands, analysts added.

Profit after tax during the quarter grew 12 per cent to Rs 52 crore against Rs 46 crore in Q3FY22. Earnings before interest, taxes, depreciation, and amortization (Ebitda) margin, too, improved 130 basis points (bps) to 4.7 per cent from 3.4 per cent, in the year ago quarter. The management indicated that value engineering, cost optimisation and certain price hikes were the main margin drivers.

The company expects a sales recovery in FY24 led by a ramp up in production-linked incentives with good growth in new segments of refrigerators, wearables, IT, hardware and telecom, recovery in LED TVs and customer additions in mobile segment which should boost revenues and margins.

JM Financial Research has cut its earnings forecast by 12-16 per cent to factor in demand weakness, resulting in a 40 per cent EPS annual growth over FY22-25 compared to 43 per cent of EPS growth over the last three years. BOB Capital Markets has cut its EPS estimates by a sharper 26-28 per cent for FY23/24 given the lower guidance.

Dixon is a business-to-business supplier of consumer durables, lighting, home appliances, mobile phones and other electronic items in India.