India EMS Industry Sector IC Report

INITIATING COVERAGE
India Electronics Manufacturing

Services (EMS) Industry
www.systematixgroup.in
Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters Systematix Shares and Stocks (India) Limited 1
Systematix
Institutional Equities
India EMS Industry 12 July 2023
Speedy adoption, global factors conducive for robust growth

We initiate coverage on India’s Electronics Manufacturing Services (EMS) industry
SECTOR INITIATION REPORT with a constructive view; KAYNES (BUY, TP Rs 1,930), SYRMA (BUY, TP 560) and
AVALON (BUY, TP 752) are our preferred picks (refer to the adjoining table). India is
Industry EMS set to shine in the global EMS space and estimated to post 32% CAGR at Rs ~6tn by
FY27, per industry report. A plethora of new listings in last one year and robust
guidance (30-40% revenue CAGR, normalising working capital cycle) by leading EMS
EMS - stock price performance (3-month)
companies for the next few years have piqued our interest in this industry. We
(%)
73 build in 23% revenue CAGR over FY23-25E for our coverage of 7 companies, led by
80
55 53 50
KAYNES, SYRMA and PGEL. We believe several new listings of interesting EMS
60
players are in the offing that should provide investors with multiple options to
40
18 16 choose from to participate in India’s EMS growth story.
20 7 3
0
What factors make India’s EMS industry attractive?
SYRMA
ELIN
IKIO
KAYNES
DIXON
AMBER
PGEL
AVALON
1) Government of India’s (GoI) import substitution initiatives to manufacture

electronic components locally through the Production Linked Incentive (PLI) scheme,
Source: BSE; IKIO, AVALON returns since listing price Electronics Manufacturing Clusters (EMC), Scheme for Promotion of Manufacturing
of Electronic Components and Semiconductors (SPECS), etc. While India has been
Coverage - Rating and target price successful in attracting leading global companies to manufacture smartphones and
TP Upside wearable products, the non-mobile EMS market (~Rs 500bn) is still majorly serviced
Company Rating
(Rs) (%)
through imports (~80%, mainly from China).
Amber Enterprises
BUY 2,590 17
(AMBER) 2) Vast export opportunities unfolding, especially to the US and European firms
Avalon Technologies
BUY 752 21 following China+1 strategy. Indian firms are now preferred suppliers, which de-risks
(AVALON)
them from high dependence on China. India’s low-cost labour and favourable
Dixon Technologies
(DIXON)
BUY 4,966 15 government policies are slated to drive large-scale capacities for domestic players.
Elin Electronics 3) A spurt in the addressable market through speedy adoption of electronic
BUY 197 24
(ELIN) components in consumer durables (inverter air conditioners, IoT-based and BLDC
IKIO Lighting fans), automobiles (transition to electric vehicles), industrial (digital displays, shift
NR NA NA
(IKIO)
from analog to smart meters, etc.), telecom and other end-user industries.
Kaynes Technology
BUY 1,930 16 Business model and positioning of key EMS players: While the ODM business
(KAYNES)
PG Electroplast
BUY 1,806 16
operates on high margins, OEMs focus on low margins and large volumes but having
(PGEL) healthy cash flows on low working capital needs. Backward integration and R&D are
Syrma SGS Technology key determining factors for margins. While KAYNES, SYRMA, AVALON, IKIO focus on
BUY 560 25
(SYRMA)
margins over volumes, AMBER, DIXON, ELIN, PGEL concentrate more on volumes.
Outlook and View: Leading EMS players estimate robust 30-40% CAGR for non-
consumer vertical revenues over the next 2-3 years. However, revenue in the
consumer vertical is projected at 15-20% CAGR, with sustainable long-term growth
visibility. Given this backdrop, we expect KAYNES and SYRMA to outgrow peers over
the next few years. We would focus on RoCE than margins to judge an EMS business;
DIXON, KAYNES, AVALON and IKIO rank high in this context. We initiate coverage on
the EMS industry with a constructive view; KAYNES (BUY, TP Rs 1,930), SYRMA (BUY,
TP 560) and AVALON (BUY, TP 752) are our preferred picks. Companies with strong,
visible and profitable growth could evince investor interest.
Ashish Poddar
ashishpoddar@systematixgroup.in Key risks: Inability to sustain advancements in technology and emerging trends,
+91 22 6704 8039 client loss (lack of business commitment) and general slowdown in India’s economy
Pranay Shah could hamper the businesses of EMS companies. Stock prices of EMS companies
pranayshah@systematixgroup.in have soared upto 75% in 3 months on strong management guidance. Thus, any major
Shraddha Kapadia deviation from actual results could cause these scrips to de-rate significantly.
shraddhakapadia@systematixgroup.in
Investors are advised to refer disclosures made at the end of the research report.
12 July 2023 India EMS Industry
Contents
EMS companies – peer valuation comparison ..................................................................................................................... 3
Stock Views ....................................................................................................................................................................... 4
Story in charts… ................................................................................................................................................................. 6
Indian EMS industry slated to post 32% CAGR to Rs ~6tn by FY27 ........................................................................................ 8
Players positioning – Product and service diversification across industries are keys to growth ............................................11
Product positioning – EMS companies choose between volumes and margins ....................................................................12
EMS companies - peer comparison ....................................................................................................................................13
Stock price performance chart ...........................................................................................................................................17
COMPANY SECTION
Amber Enterprises – (Initiate with BUY, TP: Rs 2,590; 17% upside potential) .......................................................................19
Avalon Technologies – (Initiate with BUY, TP: Rs 752; 21% upside potential) ......................................................................27
Dixon Technologies – (Initiate with BUY, TP: Rs 4,966; 15% upside potential) .....................................................................35
Elin Electronics – (Initiate with BUY, TP: Rs 197; 24% upside potential) ...............................................................................44
IKIO Lighting – (Not Rated) ................................................................................................................................................52
Kaynes Technology – (Initiate with BUY, TP: Rs 1,930; 16% upside potential) ......................................................................58
PG Electroplast – (Initiate with BUY, TP: Rs 1,806; 16% upside potential) ............................................................................66
Syrma SGS Technology – (Initiate with BUY, TP: Rs 560; 25% upside potential) ...................................................................72
EMS companies – peer valuation comparison

Exhibit 1: Valuation table – 1
Target P/E EPS (Rs) RoIC (%)
M-cap CMP TP Upside
Rating PE (x)
(Rs bn) 11-Jul (Rs) (%) FY23 FY24E FY25E FY23 FY24E FY25E FY23 FY25E
FY25E
AMBER 75 2,214 BUY 2,590 17 28 47 34 24 47 65 93 13 16
AVALON 36 620 BUY 752 21 40 68 41 33 9 15 19 24 26
DIXON 257 4,320 BUY 4,966 15 60 101 67 52 43 65 83 32 36
ELIN 8 158 BUY 197 24 15 28 15 12 6 10 13 11 17
IKIO 27 415 NR na Na Na 39 na na 11 na na 39 na
KAYNES 96 1,659 BUY 1,930 16 60 101 67 52 16 25 32 32 26
PGEL 35 1,556 BUY 1,806 16 28 43 33 24 36 47 64 10 19
SYRMA 79 448 BUY 560 25 40 66 44 32 7 10 14 15 21
Source: BSE, Systematix Institutional Research
Exhibit 2: Valuation table – 2

CAGR (%) (FY20-23) CAGR (%) (FY23-25E) EBITDA margin (%) RoE (%) RoCE (%) EV/EBITDA (x)
Rev EBITDA PAT Rev EBITDA PAT FY23 FY24E FY25E FY23 FY25E FY23 FY25E FY23 FY25E
AMBER 20 11 (0) 17 27 41 6 7 7 8 13 13 15 19 12
AVALON 14 20 66 22 24 44 12 12 12 10 15 17 19 31 20
DIXON 40 32 28 23 27 39 4 4 4 20 23 27 32 50 30
ELIN 11 6 (1) 15 29 53 6 7 8 5 11 10 14 11 6
IKIO 26 38 47 na na na 22 na na 43 na 37 na 29 na
KAYNES 45 60 116 32 34 40 15 15 15 10 14 21 20 55 31
PGEL 50 64 209 28 28 33 8 8 8 20 22 17 19 23 15
SYRMA 33 11 11 32 38 44 9 10 10 8 13 15 18 43 21
Source: Systematix Institutional Research
Exhibit 3: Global EMS companies – Peer valuation comparison

M-cap P/E EPS (Rs) CAGR FY20-23 CAGR FY23-25E EBITDA Margin (%) RoE (%)
CMP
(Rs bn) FY23 FY24E FY25E FY23 FY24E FY25E Rev EBITDA PAT Rev EBITDA PAT FY23 FY24E FY25E FY23 FY25E
Hon Hai Precision 3,815 275 10 12 9 28 23 30 13 17 18 2 8 3 3.8 4.1 4.2 10 10
Pegatron 491 184 10 12 10 18 16 18 4 9 10 2 1 (0) 3.1 2.7 3.0 9 9
Jabil 1,181 9,077 17 13 12 538 704 768 13 20 43 8 9 14 7.5 7.6 7.6 43 38
Flex 1,010 2,275 16 11 10 143 201 233 12 10 23 5 12 25 6.2 6.7 7.1 17 22
Wistron 786 271 25 30 21 11 9 13 9 24 29 1 7 7 4.0 4.0 4.4 13 13
Source: Bloomberg
Exhibit 4: Global EMS companies – Financial highlights

Operating Revenue (Rs bn) Material Margin (%) EBITDA margin (%)
FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23
Hon Hai Precision 12,177 13,487 15,878 17,486 5.9 5.7 6.0 6.0 3.4 3.3 3.7 3.8
Pegatron 3,114 3,522 3,341 3,477 3.3 3.5 3.7 4.3 2.6 2.7 2.5 3.1
Jabil 1,787 1,999 2,157 2,552 7.6 7.1 8.1 7.9 6.2 6.1 7.2 7.5
Flex 1,717 1,791 1,940 2,438 5.5 7.4 7.4 7.6 6.5 7.0 6.3 6.2
Wistron 2,002 2,127 2,284 2,598 4.8 5.5 5.9 7.1 2.7 2.9 3.0 4.0
Source: Bloomberg
Note: Global companies reporting period differ. We have considered March ending period based on closest available data.
Stock Views
AMBER (Initiate with BUY, TP: Rs 2,590; 17% upside potential)
AMBER – Financial Snapshot (Rs mn) We initiate coverage on Amber Enterprises (AMBER) with a BUY rating and a target
Y/E Mar FY23 FY24E FY25E price of Rs 2,590, based on 28x FY25E EPS of Rs 93. Post strong recovery in FY23
Net sales 69,271 80,223 95,155 (revenue/EBITDA/PAT up 65%/52%/47% YoY), management has guided 15-20%, 35-
EBITDA 4,179 5,305 6,740 40% and 30-35% growth, respectively, in its Mobility, Electronics and Motor divisions
OPM % 6.0 6.6 7.1 for FY24. The RAC and Components division is expected to outpace industry growth
PAT (adj.) 1,572 2,173 3,117 (likely flattish). AMBER aims to expand its RoCE to 19-21% (<15% currently) over next
EPS (adj.) (Rs) 46.7 64.5 92.5 2-3 years. Thus, after 20%/11%/flat CAGR in revenue/EBITDA/PAT over FY20-23, we
PE (x) 47.5 34.3 23.9
expect the company to record 17%/27%/41% CAGR over FY23-25E, with 105bps
P/B (x) 3.9 3.5 3.1
expansion in its EBITDA margin to ~7%. ROIC too is expected to expand ~400bps to
RoE (%) 8.2 10.3 12.9
RoCE (%) 13.3 12.5 14.7 16.4% in FY25E.
Net-D/E (x) 0.3 0.3 0.3
AVALON (Initiate with BUY, TP: Rs 752; 21% upside potential)
AVALON – Financial Snapshot (Rs mn) We initiate coverage on Avalon Technologies (AVALON) with a BUY rating and a
Y/E Mar FY23 FY24E FY25E target price of Rs 752, based on 40x FY25E EPS of Rs 19. After a soft FY23
Net sales 9,447 11,750 14,160 (revenue/EBITDA up 12%/16%, PAT down 17% YoY), management aims to at least
EBITDA 1,128 1,426 1,747 double its revenue over the next three years, led by 30-40% CAGR in its Aerospace
OPM % 11.9 12.1 12.3 and Clean Energy verticals. The company expects order book and revenue build up
PAT (adj.) 525 883 1,090 from the marquee clients and projects it has acquired in the last six months. Current
EPS (adj.) (Rs) 9.1 15.2 18.8 low plant utilisation (~60%), ~Rs 600mn capex over next two years and high asset
PE (x) 68.4 40.7 33.0 turnover (~10x) provide strong headroom for growth. AVALON also aims to reduce
P/B (x) 6.7 5.7 4.9
its Net Working Capital (NWC) days (148 currently) by 10-15 days on lower inventory
RoE (%) 9.8 14.1 14.8
days, and thus improve its cash flows. A healthy order book (Rs 12.3bn, 1.3x FY23
RoCE (%) 17.3 16.2 18.6
Net-D/E (x) (0.2) (0.1) (0.1) revenue) and 25%+ RoIC are other positives. Post 14%/20%/66% CAGR in revenue/
EBITDA/ PAT over FY20-23, we estimate 22%/24%/44% CAGR over FY23-25E, with
~250bps expansion in its RoIC to 26% in FY25E.
DIXON (Initiate with BUY, TP: Rs 4,966; 15% upside potential)

DIXON – Financial Snapshot (Rs mn) We initiate coverage on Dixon Technologies (DIXON) with a BUY rating, and a target
Y/E Mar FY23 FY24E FY25E price of Rs 4,966, based on 60x FY25E EPS of Rs 83. In FY23, while revenue grew by a
Net sales 1,21,920 1,52,667 1,85,858 low 14% YoY, EBITDA/PAT rose 35%/34% YoY on 66bps expansion in EBITDA margin to
EBITDA 5,127 6,680 8,300 4.2%. RoE (~20%) and RoCE (30%+) have been quite healthy, aided by high asset-
OPM % 4.2 4.4 4.5 turnover (~8x) and low NWC days (7). For FY24, management has guided 15-20%
PAT (adj.) 2,551 3,850 4,928 revenue growth, to be led by mobile & EMS and home appliances divisions and ~4.5%
EPS (adj.) (Rs) 42.8 64.6 82.8
EBITDA margin. Price reduction will likely restrict growth in the lighting division to 12-
PE (x) 100.9 66.8 52.2
15%, despite aggressive product launches and export orders from the UAE, Germany,
P/B (x) 20.0 15.5 12.1
RoE (%) 19.9 23.2 23.1 the US and UK. A superior product mix, operating leverage benefits, cost optimisation
RoCE (%) 27.2 31.9 32.2 and price hikes in ODM should drive overall EBITDA margin (to ~4.5%). It plans to incur a
Net-D/E (x) (0.0) (0.0) (0.0) capex of ~Rs 4bn, largely in the refrigeration and mobile segments. Post 40%/32%/28%
CAGR in revenue/ EBITDA/PAT over FY20-23, we estimate 23%/27%/39% CAGR over
FY23-25E with 300-500bps expansion in RoE/RoCE/RoIC to ~23%/32%/36% in FY25E.
ELIN (Initiate with BUY, TP: Rs 197; 24% upside potential)
ELIN – Financial Snapshot (Rs mn) We initiate coverage on Elin Electronics (ELIN) with a BUY rating and a target price of
Y/E Mar FY23 FY24E FY25E Rs 197, based on 15x FY25E EPS of Rs 13. FY23 was muted (revenue/EBITDA/PAT
Net sales 10,755 12,368 14,223 down 2%/18%/32% YoY), impacted by delays in product launches and downtrading
EBITDA 652 898 1,090 in small appliances. Management expects low-to-mid-teen revenue growth, with
OPM % 6.1 7.3 7.7 EBITDA margin of 7-7.5% in FY24, led by fans (flat in FY23) on new launches
PAT (adj.) 269 495 628 (TPW/BLDC fans). Lower realisation will likely restrict Lighting revenue. In small
EPS (adj.) (Rs) 5.6 10.3 13.1 appliances, mixer grinder capacity for entry and mid-range products is expected to
PE (x) 28.2 15.3 12.1 be operational by Sep 2023. Backward integration through PLI scheme for LED
P/B (x) 1.5 1.4 1.3 lighting could drive margins. Thus, post 11%/6%/-1% CAGR in revenue/EBITDA/PAT
RoE (%) 5.5 9.2 10.5
over FY20-23, we estimate 15%/29%/ 53% CAGR over FY23-25E. RoIC too should
RoCE (%) 9.8 12.2 13.9
expand 580bps to ~17% in FY25E.
Net-D/E (x) (0.1) (0.1) (0.1)
KAYNES (Initiate with BUY, TP: Rs 1,930; 16% upside potential)
KAYNES – Financial Snapshot (Rs mn) We initiate coverage on Kaynes Technology (KAYNES) with a BUY rating, and a target
Y/E Mar FY23 FY24E FY25E price of Rs 1,930, based on 60x FY25E EPS of Rs 32. Robust industry tailwinds and
Net sales 11,261 15,203 19,763 KAYNES’ strong focus on the entire customer value chain has helped the company in
EBITDA 1,683 2,303 3,033 maintaining a superior business profile over peers. After posting strong FY23
OPM % 14.9 15.1 15.3 numbers (revenue/ EBITDA/PAT up 59%/80%/128% YoY), management is heading for
PAT (adj.) 952 1,440 1,870 30-40% CAGR in revenue over next few years, based on order booking from
EPS (adj.) (Rs) 16.4 24.8 32.2
customers. KAYNES’ Rs 26.5bn order book (2.4x FY23 revenue), Rs 2.2bn capex in
PE (x) 101.3 67.0 51.6
FY24 (to triple capacity) and ~5x asset-turnover provide robust outlook on growth for
P/B (x) 10.1 8.7 7.5
RoE (%) 9.9 13.1 14.5
KAYNES. Likely lower NWC days (99 currently) should boost cash flows. Post
RoCE (%) 21.1 17.9 20.0 45%/60%/116% CAGR in revenue/EBITDA/PAT over FY20-23, we estimate
Net-D/E (x) (0.3) (0.2) (0.1) 32%/34%/40% CAGR over FY23-25E, with healthy 26% RoIC despite high capex.
PGEL (Initiate with BUY, TP: Rs 1,806; 16% upside potential)
PGEL – Financial Snapshot (Rs mn) We initiate coverage on PG Electroplast (PGEL) with a BUY rating, and a target price
Y/E Mar FY23 FY24E FY25E of Rs 1,806, based on 28x FY25E EPS of Rs 64. Post strong FY23 (revenue up 96% YoY
Net sales 21,599 28,020 35,136 at Rs 21.5bn, EBITDA margin stable at 8.4%, PAT up 107%, and RoE/RoCE of
EBITDA 1,760 2,284 2,864 ~19%/~22%), management aims for 30% YoY growth in FY24, led by 43% rise in the
OPM % 8.2 8.2 8.2 product business (WM, RACs, Coolers; likely revenue of Rs 19.2bn), which would
PAT (adj.) 775 994 1,369 contribute to 68% of revenue (44%/62% in FY22/FY23). Its WC cycle is expected to
EPS (Rs) 36.5 46.8 64.5 improve once sourcing shifts from China to domestic vendors. While operating
PE (x) 42.6 33.2 24.1 margins across segments may remain stable, a change in the mix could limit overall
P/B (x) 8.9 7.2 5.6
margins. PGEL intends to incur Rs 1.8bn capex (funded via internal accruals) on RACs
RoE (%) 19.6 20.1 21.7
(to double capacity) and other products. PLI benefit of Rs 150mn is expected in FY24.
RoCE (%) 17.2 17.3 18.8
Net-D/E (x) 1.3 1.3 1.0 Post 50%/64%/209% CAGR in revenue/EBITDA/PAT over FY20-23, we estimate
28%/28%/33% CAGR over FY23-25E with ~200bps expansion in its RoE to 22%. RoIC
is also likely to expand to ~19% over FY23-25E, from 9.6% currently.
SYRMA (Initiate with BUY, TP: Rs 560; 25% upside potential)
SYRMA – Financial Snapshot (Rs mn) We initiate coverage on Syrma SGS (SYRMA) with a BUY rating, and a target price of
Y/E Mar FY23 FY24E FY25E Rs 560, based on 40x FY25E EPS of Rs 14. After a robust FY23 (revenue/EBITDA/PAT
Net sales 20,484 27,653 35,949 up 62%/49%/61% YoY on proforma basis), management has guided for over 35-40%
EBITDA 1,878 2,646 3,583 revenue growth in the medium term, backed by industry tailwinds and marquee
OPM % 9.2 9.6 10.0 customer additions (~10 in FY23). The revised PLI scheme for IT hardware would
PAT (adj.) 1,193 1,813 2,474 further drive growth. EBITDA margin may touch double-digits from 9.2% in FY23.
EPS (adj.) (Rs) 6.7 10.3 14.0 Improvement in asset turnover (<2x in FY23), backed by ramp up at its new
PE (x) 66.4 43.7 32.0 capacities and better NWC capital days (90 days in FY23) should boost its current
P/B (x) 5.1 4.7 4.3 subpar return ratios (~15% RoIC). It aims to incur a capex of >Rs 2bn in FY24, with an
RoE (%) 7.7 10.8 13.3
asset turnover of ~6x. Post 33%/11%/11% CAGR in revenue/ EBITDA/PAT over FY20-
RoCE (%) 14.9 13.8 17.7
23, we estimate 32%/38%/44% CAGR over FY23-25E, with RoE and RoIC expanding
Net-D/E (x) 0.1 (0.1) (0.1)
~550bps to ~13% and ~21%, respectively, in FY25E.
Story in charts…
Exhibit 5: Revenue, EBITDA margin, PAT margin (FY23) Exhibit 6: Revenue CAGR
(Rs bn) (%) (%)
22.3
200 25 80
14.9
11.9
9.2
KAYNES, 45
8.2
PGEL, 50
4.2 6.0 6.1
SYRMA (P), 33
150 9
SYRMA (P), 32
DIXON, 40
15.6 60
KAYNES, 32
5.8 8.5
3.6 5.6
IKIO (P), 26
2.1 2.3 2.5
AVALON, 22
100 (8)
PGEL, 28
DIXON, 23
AMBER, 20
AMBER, 17
AVALON, 14
40
50 (24)
ELIN, 15
ELIN, 11
122 69 22 20 11 11 9 4
0 (40) 20
DIXON AMBER PGEL SYRMA KAYNES ELIN AVALON IKIO (P)
(P)
0
Revenue EBITDA margin (RHS) PAT margin (RHS) FY23-25E FY20-23
Exhibit 7: EBITDA CAGR Exhibit 8: EBITDA margin (%)

(%) (%)
IKIO (P), 22.3

KAYNES, 60
PGEL, 64
80 30
KAYNES, 15.3
KAYNES, 14.9
SYRMA (P), 38
AVALON, 12.3
AVALON, 11.9
SYRMA (P), 10.0
IKIO (P), 38
23
KAYNES, 34
60
SYRMA (P), 9.2

DIXON, 32
AMBER, 27
AVALON, 24
DIXON, 27
ELIN, 29
AVALON, 20
PGEL, 28
AMBER, 7.1
PGEL, 8.2
PGEL, 8.2
AMBER, 6.0
SYRMA (P), 11
ELIN, 7.7
40 15
DIXON, 4.5
ELIN, 6.1
DIXON, 4.2
AMBER, 11
ELIN, 6
20 8
0 0
FY23-25E FY20-23 FY25E FY23
Exhibit 9: PAT CAGR Exhibit 10: Overseas revenue mix (FY23)

PGEL, 209
(%) (%)
230 70
59
KAYNES, 116
170 53
AVALON, 66
SYRMA (P), 44
AVALON, 44
IKIO (P), 47
KAYNES, 40
31
AMBER, 41
110 35
ELIN, 53
DIXON, 39
SYRMA (P), 11
DIXON, 29
PGEL, 33
AMBER, (0)
ELIN, (1)
15
50 18
7
0
(10) 0
FY23-25E FY20-23 AVALON SYRMA (P) KAYNES IKIO (P) ELIN
0
15
30
45
60
(%)
(%)
0
30
90
60
120
(50)
50
100
150
(%)
DIXON, 36
SYRMA (P), 89
12 July 2023
100
Home
AVALON, 26
DIXON -
DIXON, 81
Appliances
KAYNES, 26
AMBER, 62
Exhibit 13: RoIC (%)

SYRMA (P), 21
PGEL, 55
90
FY25E
PGEL, 19
FY25E
Lighting
DIXON -
ELIN, 45
KAYNES, 28 ELIN, 17
Exhibit 15: OCF/EBITDA (%)

AVALON, 27 AMBER, 16
23
DIXON -
Consumer
Electronics
Exhibit 11: ODM revenue mix (FY23)
Source: Company, Systematix Institutional Research

Note: “P” stands for proforma data for IKIO, SYRMA
SYRMA (P), (30) DIXON, 32
93
IKIO (P)
DIXON, 140 AVALON, 26
AMBER, 68 KAYNES, 32
PGEL, 25 SYRMA (P), 16
18
FY23
FY23
ELIN, 92 PGEL, 10
SYRMA (P)
KAYNES, (23) ELIN, 11

AVALON, (10) AMBER, 12
3
IKIO (P), 44 IKIO (P), 39

KAYNES
0
13
25
38
50
(%)
0
40
80
120
160
(1)
0
1
2
3
(x)
(Days)
PGEL, 1.3 DIXON, 23 AVALON, 133

IKIO (P), 0.8 PGEL, 22 KAYNES, 108
AMBER, 0.3 AVALON, 15 SYRMA (P), 75
Systematix Research is also available on Bloomberg SSSL <Go>, Thomson & Reuters
Exhibit 14: RoE (%)
SYRMA (P), 0.1 KAYNES, 14 ELIN, 66
FY23
FY25E
SYRMA (P), 13
FY25E
DIXON, (0.0) PGEL, 60

ELIN, (0.1) AMBER, 13 AMBER, 29
AVALON, (0.2) ELIN, 11 DIXON, 7
Exhibit 12: Net-WC cycle (Days)
KAYNES, (0.3)
Exhibit 16: Net debt to equity (x)
Aided from
IPO proceeds
PGEL, 1.0 DIXON, 20 AVALON, 148
PGEL, 20 KAYNES, 135
AMBER, 0.3 AVALON, 10 SYRMA (P), 90
SYRMA (P), (0.1) KAYNES, 10 ELIN, 66
FY23
FY23
FY25E
DIXON, (0.0) SYRMA (P), 8 PGEL, 68
ELIN, (0.1) AMBER, 8 AMBER, 29
AVALON, (0.1) ELIN, 5 DIXON, 7
KAYNES, (0.1) IKIO (P), 43 IKIO (P), 140
Systematix Shares and Stocks (India) Limited

India EMS Industry
7
Indian EMS industry slated to post 32% CAGR to Rs ~6tn by FY27

Exhibit 17: Indian EMS players - well positioned to capitalize on strong industry tailwinds
Source: Kaynes | *Others include: Mobile Phones, CEA (Consumer electronics and appliances), IT (Information Technology products), Lighting, Energy, etc.
Exhibit 18: EMS’ contribution to electronics market in Exhibit 19: India EMS industry: growth, OEM-ODM mix trend
key economies (FY22); India sees large potential
(%) (Rs
(Rs bn)
bn) 5,995
5,995
45 6,000
6,000 CAGR (FY17-22): 22.2%
39 EMS
India to scale up CAGR (FY22-27): 32.5%
35
faster to reach 4,502
4,502
34 32 4,500 ODM CAGR (FY17-22): 22.2%
global average
ODM
CAGR (FY22-27): 32.4%
3,280
3,280 4,778
OEM 4,778
23
3,000
23 3,000 OEM CAGR (FY17-22): 22.5% 2,453
2,453 3,597
CAGR (FY22-27): 33.0% 3,597
1,846
1,469 1,846 2,624
2,624
1,500 1,064 1,172 1,469 1,962
1,500 869
11 538 689 1,064 1,172 1,176 1,479 1,962
869 940 1,479
538 689 697 853
1,176 905
1,217
432 553 656
853
211 940
232 292 367 491 1,217
0 106 136 172
697 905
432 553 656
232 367
292 FY23E 491
0 0 FY17
106 FY18
FY19
136172 211
FY20 FY21 FY22 FY24E FY25E FY26E FY27E
Global India China USA FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E
Source: Cyient DLM, Systematix Institutional Research Source: Cyient DLM, Systematix Institutional Research
Exhibit 20: India EMS market – growth outlook of various end-user industries
FY22 End-user Industries FY27E
(Rs 1.4tn, USD 20bn) CAGR (FY22-FY27E) (Rs 6tn, USD 80bn)
3% 4%
4% 2% Mobile Phones (33%) 3% 2%
4% 4%
Consumer Elec. & Appl (34%) 2%
4%
2%
2% Lighting (35%)
4%
4% IT (36%)
Telecom (21%)
Automotive (30%) 13%

12%
65% Industrial (22%) 66%

Medical (41%)
Aerospace, Defence and Others (38%)
Source: Cyient DLM, Systematix Institutional Research
Exhibit 21: India EMS Industry - Opportunities in different B2B verticals

Global EMS market size India EMS market size
Industry Market dynamics (USD bn) (Rs bn)
2021 2026 CAGR FY22 FY27E CAGR
• A&D is one of the most complex and specialised industries in EMS
• India ranked 19th among the world’s defence exporters in attracting
A&D the foreign investments 34 45 6.0 37 186 38.0
• Relaxation in FDI investment in the A&D sector aids in collaborating
with global players to have a competition edge in the market
• Increased demand for healthcare and medical devices from rise in
medical tourism. Need for high-speed analysis is also driving growth of
the medical equipment’s market
Medical • It is backed by government’s commitment to facilitate growth 27 37 6.0 23 125 40.9
• Development of ‘medical device parks’ across States create a robust

ecosystem for manufacturing in India
• India is gradually progressing towards Industry 4.0 through
government initiatives
Industrial 80 110 6.5 58 115 21.7
• The rapid adoption of modern technology, backed by costsaving
features, is driving growth in this market
• India is one of the largest exporters of telecom equipment and this
trend expected to increase
• Increased outsourcing to companies with design, logistics and after
Telecom sales support 95 126 5.7 57 145 20.5
• Data centre storage solutions, BTS, GPON, IP PBX, Network infra (4G
and 5G) related solutions are the key offerings of the EMS companies
• Themes such as Connected, Autonomous, Shared and Electric are

driving digitalization and requirement for EMS in this space
Automotive 63 85 6.3 66 240 29.5
• Significantly higher usage of electronics and controls in EV
• ADAS, EV and Safety are fast-emerging segments
Source: Cyient DLM
Exhibit 22: Increasing sizes of RAC and RAC-component industries; AMBER has gained hefty market share
Source: Amber * company estimates # RAC components include sheet metal, injection molding, copper, heat exchangers, motors, PCBA and cross-flow fans ^ excl. GST
Players positioning – Product and service diversification across industries are keys to growth
Exhibit 23: Positioning of key EMS companies
Source: Avalon
Exhibit 24: Diversified product offerings by key EMS companies in the non-consumer verticals
Source: Kaynes Note: PCB/PCBA/Box build content mix is highest in IoI/IT (40-50%) followed by Telecom (~30%), Industrial (20-30%) and Aerospace/defense (15-25%)
Product positioning – EMS companies choose between volumes and margins

Exhibit 25: Product categorisation based on volumes and margins Exhibit 26: Company categorisation based on product offerings
PGEL
DIXON AMBER
ELIN
SYRMA KAYNES
AVALON IKIO
Source: Syrma, Systematix Institutional Research Source: Systematix Institutional Research
Exhibit 27: Chain of product service offerings and margin profile Exhibit 28: Services offered by EMS cos. in non-consumer verticals
Margin profile
PCB Assembly Box Assembly
Low High Assembly of components on Housing of PCBA in a small
bare PCBs enclosure
Product Testing System Integration

Testing the product Bringing together the
performance and identifying component sub-systems
defects Electronics into one system
System Design
&
Prototype Manufacturing Solutions Design
Prototyping of electronics Designing the entire
schematic on a breadboard solution for any specific
or another platform requirement
Product Design
Conceptualizing and design Repair and Rework Services
of electronic products Repair and remanufacturing
(Hardware design, software process
and firmware design)
Source: Avalon, Systematix Institutional Research Source: Avalon, Systematix Institutional Research
EMS companies - peer comparison

Exhibit 29: EMS companies – peer comparison
CAGR (%)
FY20 FY21 FY22 FY23 FY24E FY25E FY23-25E FY20-23
Revenue (Rs bn)
AMBER 40 30 42 69 80 95 17 20
AVALON 6 7 8 9 12 14 22 14
DIXON 44 64 107 122 153 186 23 40
ELIN 8 9 11 11 12 14 15 11
IKIO (proforma) 2 2 3 4 26
KAYNES 4 4 7 11 15 20 32 45
PGEL 6 7 11 22 28 35 28 50
SYRMA (proforma) 9 9 13 20 28 36 32 33
Top- 5 customer revenue mix (%)
AVALON 46 49 50 37
ELIN 69 63 63 65
IKIO (proforma) 73 83 73 78
KAYNES 39 32 37 45
SYRMA (proforma) 41 33 29
Overseas revenue mix (%)
AVALON 66 67 62 59
KAYNES 21 26 20 15
SYRMA (proforma) 58 53 44 31
ODM revenue mix (%)
DIXON - Consumer Electronics 6 5 4 23
DIXON – Lighting 87 90 91 90
DIXON - Home Appliances 100 100 100 100
KAYNES 2 4 4 3
SYRMA (proforma) 18
EBITDA (Rs mn)
AMBER 3,093 2,203 2,754 4,179 5,305 6,740 27 11
AVALON 645 661 975 1,128 1,426 1,747 24 20
DIXON 2,231 2,866 3,791 5,127 6,680 8,300 27 32
ELIN 555 665 790 652 898 1,090 29 6
IKIO (proforma) 373 478 773 979 38
KAYNES 413 409 937 1,683 2,303 3,033 34 60
PGEL 399 498 745 1,760 2,284 2,864 28 64
SYRMA (proforma) 1,366 999 1,259 1,878 2,646 3,583 38 11
PAT (Rs mn)
AMBER 1,584 816 1,092 1,572 2,173 3,117 41 (0)
AVALON 115 215 632 525 883 1,090 44 66
DIXON 1,205 1,598 1,903 2,557 3,850 4,928 39 29
ELIN 275 348 391 269 495 628 53 (1)
IKIO (proforma) 214 288 505 685 47
KAYNES 95 94 417 952 1,440 1,870 40 116
PGEL 26 116 374 775 994 1,369 33 209
SYRMA (proforma) 884 630 722 1,193 1,813 2,474 44 11
FY20 FY21 FY22 FY23 FY24E FY25E

EBITDA margin (%)
AMBER 7.8 7.3 6.5 6.0 6.6 7.1
AVALON 10.0 9.6 11.6 11.9 12.1 12.3
DIXON 5.1 4.4 3.5 4.2 4.4 4.5
ELIN 7.1 7.7 7.2 6.1 7.3 7.7
IKIO (proforma) 16.9 22.4 23.3 22.3
KAYNES 11.2 9.7 13.3 14.9 15.1 15.3
PGEL 6.2 7.1 6.8 8.2 8.2 8.2
SYRMA (proforma) 15.8 11.3 9.9 9.2 9.6 10.0
PAT margin (%)
AMBER 4.0 2.7 2.6 2.3 2.7 3.3
AVALON 1.8 3.1 7.5 5.6 7.5 7.7
DIXON 2.7 2.5 1.8 2.1 2.5 2.7
ELIN 3.5 4.0 3.6 2.5 4.0 4.4
IKIO (proforma) 9.7 13.5 15.2 15.6
KAYNES 2.6 2.2 5.9 8.5 9.5 9.5
PGEL 0.4 1.7 3.4 3.6 3.5 3.9
SYRMA (proforma) 10.2 7.1 5.7 5.8 6.6 6.9
Net debt to equity (x)
AMBER 0.2 (0.0) 0.1 0.3 0.3 0.3
AVALON 5.2 4.6 3.5 (0.2) (0.1) (0.1)
DIXON (0.0) 0.1 0.3 (0.0) (0.0) (0.0)
ELIN 0.2 0.4 0.3 (0.1) (0.1) (0.1)
IKIO (proforma) 1.3 1.2 1.0 0.8
KAYNES 1.4 1.0 0.8 (0.3) (0.2) (0.1)
PGEL 0.9 0.9 1.1 1.3 1.3 1.0
SYRMA (proforma) 0.1 0.0 0.3 0.1 (0.1) (0.1)
Net Working Capital Days
AMBER 37 56 39 29 29 29
AVALON 76 106 127 148 138 133
DIXON 6 7 7 7 7 7
ELIN 48 82 66 66 66 66
KAYNES 151 165 134 135 114 108
PGEL 45 45 77 68 64 60
SYRMA (proforma) 63 81 93 90 80 75
Debtor days
AMBER 79 129 114 93 90 90
AVALON 65 96 77 80 80 80
DIXON 43 62 46 51 51 51
ELIN 42 77 59 67 67 67
KAYNES 93 106 102 74 73 72
PGEL 58 76 71 74 72 70
SYRMA (proforma) 76 86 78 72 72 72

Inventory days
AMBER 60 86 73 58 60 60
AVALON 88 77 101 123 113 108
DIXON 41 42 39 29 29 29
ELIN 37 49 40 42 42 42
KAYNES 150 142 117 134 114 109
PGEL 48 48 95 60 58 56
SYRMA (proforma) 60 74 84 105 95 90
Payable days
AMBER 102 159 148 121 121 121
AVALON 77 67 51 55 55 55
DIXON 78 97 79 73 73 73
ELIN 32 44 33 43 43 43
KAYNES 91 83 85 72 72 72
PGEL 61 80 90 66 66 66
SYRMA (proforma) 73 78 69 87 87 87
RoE (%)
AMBER 14 5 6 8 10 13
AVALON 25 36 72 10 14 15
DIXON 22 22 19 20 23 23
ELIN 12 13 13 5 9 11
KAYNES 9 7 21 10 13 14
PGEL 1 6 12 20 20 22
SYRMA (proforma) 19 12 13 8 11 13
RoCE (%)
AMBER 19 11 11 13 12 15
AVALON 24 20 26 17 16 19
DIXON 33 32 25 27 32 32
ELIN 16 17 16 10 12 14
KAYNES 26 13 24 21 18 20
PGEL 15 9 13 17 17 19
SYRMA (proforma) 23 15 17 15 14 18
RoIC (%)
AMBER 17 9 9 12 14 16
AVALON 27 22 27 26 26 26
DIXON 37 35 28 32 37 36
ELIN 17 18 17 11 15 17
KAYNES 26 12 25 32 27 26
PGEL 3 4 7 10 9 19
SYRMA (proforma) 26 18 18 16 16 21

OCF/ EBITDA (%)
AMBER 91 87 78 68 65 62
AVALON 87 8 14 (10) 23 27
DIXON 104 59 71 140 84 81
ELIN 137 (49) 64 92 44 45
IKIO (proforma) 34 (0) (7) 44
KAYNES 105 62 22 (23) 33 28
PGEL 65 109 (86) 25 48 55
SYRMA (proforma) 103 32 (9) (30) 155 89
OCF/ PAT (%)
AMBER 182 271 220 204 168 140
AVALON 570 26 25 (25) 42 47
DIXON 1058 493 (212) 59 147 139
ELIN 197 106 143 284 83 82
IKIO (proforma) 176 59 (17) (59)
KAYNES 62 (0) (10) 67 56 47
PGEL 279 (97) 131 232 112 117
SYRMA (proforma) 478 296 51 (44) 262 145
Total asset turnover (x)
AMBER 2.6 1.4 1.5 2.0 2.3 2.6
AVALON 8.8 4.8 4.3 1.7 2.3 2.6
DIXON 6.9 7.1 7.3 8.2 8.1 7.9
ELIN 3.6 3.3 3.7 2.5 2.8 3.0
IKIO (proforma) 5.6 2.0 1.8 1.7
KAYNES 2.4 2.5 4.0 1.4 1.7 2.0
PGEL 1.8 1.8 1.5 2.2 2.4 2.6
SYRMA (proforma) 2.6 2.3 3.0 1.6 2.5 3.8
Stock price performance chart

AMBER AVALON
2,670 675
2,409 581
2,148 488
1,886 394
1,625 300
Oct-22
Nov-22
Jan-23
Apr-23
Jul-22
Jul-23
Aug-22
Feb-23
May-23
Apr-23
Jul-23
May-23
Jun-23
DIXON ELIN
5,000 250
4,250 213
3,500 175
2,750 138
2,000 100
Jan-23
Feb-23
Apr-23
Dec-22
Mar-23
Jul-23
Jun-23
May-23
Oct-22
Nov-22
Jan-23
Apr-23
Jul-22
Jul-23
Aug-22
Feb-23
May-23
IKIO KAYNES
480 1,900
455 1,525
430 1,150
405
775
380
400
16-Jun-23
19-Jun-23
22-Jun-23
25-Jun-23
28-Jun-23
01-Jul-23
04-Jul-23
07-Jul-23
Nov-22
Jan-23
Apr-23
Jul-23
Feb-23
May-23
PGEL SYRMA
2,000 500
1,625 419
1,250 338
875 256
500 175
Oct-22
Jan-23
Apr-23
Jul-23
Nov-22
Aug-22
Feb-23
May-23
Oct-22
Jan-23
Apr-23
Jul-22
Jul-23
Nov-22
Aug-22
Feb-23
May-23
Source: BSE, Systematix Institutional Research
COMPANY SECTION
Systematix
Amber Enterprises 12 July 2023
A leader in RAC spreads wings to non-consumer vertical

INITIATING COVERAGE We initiate coverage on Amber Enterprises (AMBER) with a BUY rating and a target
Sector: EMS Rating: BUY price of Rs 2,590, based on 28x FY25E EPS of Rs 93. Post strong recovery in FY23
(revenue/EBITDA/PAT up 65%/52%/47% YoY), management has guided 15-20%,
CMP: Rs 2,214 Target Price: 2,590
35-40% and 30-35% growth, respectively, in its Mobility, Electronics and Motor
Stock Info divisions for FY24. The RAC and Components division is expected to outpace
Sensex/Nifty 65,618/19,439 industry growth (likely flattish). AMBER aims to expand its RoCE to 19-21% (<15%
Bloomberg AMBER IN currently) over next 2-3 years. Thus, after 20%/11%/flat CAGR in
Equity shares (mn) 23.8 revenue/EBITDA/PAT over FY20-23, we expect the company to record
52-wk High/Low 2,525/1,791 17%/27%/41% CAGR over FY23-25E, with 105bps expansion in its EBITDA margin to
Face value Rs 10 ~7%. ROIC too is expected to expand ~400bps to 16.4% in FY25E.
M-Cap Rs 75bn/ USD 910mn
3-m avg turnover USD 6.4mn Company profile: AMBER is a leader in RAC manufacturing, enjoying ~30% share
(20%+ share in RAC-PCBA) in the domestic market. It also commands 25%+ market
Financial Snapshot (Rs mn)
share across components (except for heat exchangers) and ~40% in cross-flow fans.
Y/E Mar FY23 FY24E FY25E
Since its IPO in FY18, AMBER has strengthened its backward integration in RACs, and
Net sales 69,271 80,223 95,155
EBITDA 4,179 5,305 6,740 diversified into non-consumer verticals (HVAC solutions for railways, metro, defence,
OPM % 6.0 6.6 7.1 bus and commercial segments). Its 25 manufacturing facilities spread across 9 states
PAT (adj.) 1,572 2,173 3,117 in India are strategically located close to customer locations, enabling faster
EPS (adj.) (Rs) 46.7 64.5 92.5 turnaround. The company incurred most of ~Rs 7bn FY23 capex in 2H, benefits of
PE (x) 47.5 34.3 23.9 which should fully reflect in FY24. Timely capex investments have aided profitability
P/B (x) 3.9 3.5 3.1 and market-share gains in the company’s respective verticals. It has committed ~Rs
EV/EBITDA (x) 19.3 15.4 12.0 4bn capex under GoI’s PLI scheme (~Rs 3bn for ACs and ~Rs 1bn for electronic
RoE (%) 8.2 10.3 12.9 components) and expects to receive incentive soon.
RoCE (%) 13.3 12.5 14.7
Net-D/E (x) 0.3 0.3 0.3 Revenue-mix across verticals (FY23): RACs (43%), Components (30%), Electronic
PCBs (16%), Mobility (6%) and Motors (4%)
Shareholding Pattern (%)
Mar'23 Dec'22 Sep'22 Financial highlights: In FY23, consolidated revenue/ EBITDA/ PAT grew at 65%/ 52%/
Promoter 40.3 40.3 40.3 47% YoY to Rs 69.3bn, Rs 4.2bn and Rs 1.6bn, respectively. EBITDA margin fell 51bps
- Pledged YoY to 6%, due to 80bps fall in gross margin to 15.3%. PAT margin contracted 24bps
FII 23.9 27.1 26.4 YoY to 2.4%. Effective tax rate was 25.4% in FY23 (27.8% in FY22). Working capital
DII 13.5 11.5 13.9 cycle reduced by 10 days to 29 days, boosting operating cash flows. Low PAT margin
Others 22.2 21.1 19.4
and asset turnover (2x) led to weak RoE (8.2%) and RoCE (13.3%).
Stock Performance (1-year)
Management guidance: For FY24, management expects the RAC and Components
3,030
division to outpace industry growth (likely flattish). Mobility, Electronics and Motor
2,679 divisions are expected to grow at 15-20%, 35-40% and 30-35%, respectively. RoCE is
2,328 slated to improve to 19-21% over the next 2-3 years from <15% currently. AMBER
has realigned its strategy to offer comprehensive solutions in components, in
1,976
tandem with RAC customers’ strategy to insource. In Mobility, defense application
1,625 business is seeing robust growth, as AMBER expands wallet share with its existing
Oct-22
Jan-23
Nov-22
Apr-23
Jul-23
Jul-22
Aug-22
May-23
Feb-23
customers. In Electronics, wearables is witnessing strong traction with new customer

AMBER Sensex
additions. In Motors, AMBER is expanding BLDC motors SKUs for Window ACs and
commercial segments and is in advanced stages to add marquee clients in exports.
Outlook and View: Post 20%/11%/flat CAGR in revenue/EBITDA/PAT over FY20-23,
we expect AMBER to post 17%/27%/41% CAGR over FY23-25E, with 105bps EBITDA
margin expansion to ~7%. RoIC too could expand ~400bps during this period to
16.4% in FY25E. With a positive outlook, we initiate coverage on AMBER with a BUY
rating and a target price of Rs 2,590, based on 28x FY25E EPS of Rs 93.
12 July 2023 Amber Enterprises
Story in charts
Exhibit 1: Revenue growth trend Exhibit 2: Gross, EBITDA and PAT margin trend
(Rs bn) (%) (%)
100 95.2 20 10
FY20-23 CAGR: 20% 16.7 17.1
16.1 15.5 15.7
FY23-25E CAGR: 17% 80.2 15.3
69.3 15 8
75 7.8
7.3 7.1
6.5 6.6
10 6.0 5
50 42.1
39.6
30.3 4.0
5 3.3 3
2.7 2.6 2.7
25 2.3
0 0
0
FY20 FY21 FY22 FY23 FY24E FY25E Gross margin EBITDA margin (RHS) PAT margin (RHS)
Exhibit 3: PAT, PAT margin trend Exhibit 4: Net-WC cycle trend

(Rs bn) (%) (Days)
159
4.0 FY20-23 CAGR: 0% 5 180
148
4.0 FY23-25E CAGR: 41%
129
121
121
121
114
3.0 3.3 4 135
102
2.7 2.7
2.6 93
90
90
86
2.3
79
73
2.0 3 90
60
58
60
60
56
39
37
29
29
29
1.0 1 45
1.6 0.8 1.1 1.6 2.2 3.1

0.0 0 0
FY20 FY21 FY22 FY23 FY24E FY25E Debtor Days Inventory Days Creditor Days Net-WC Days
PAT PAT margin (RHS) FY20 FY21 FY22 FY23 FY24E FY25E
Exhibit 5: ROIC, ROE trend Exhibit 6: Net-Debt/Equity trend

(%) (x)
20 17 0.5
16
0.3 0.3
15 14
13 0.3 0.3
14 0.2
9 0.1
10 9 13
10 0.1
0.0
8
5
6
5 (0.1)
0
(0.3)
ROE ROIC FY20 FY21 FY22 FY23 FY24E FY25E
Exhibit 7: Revenue mix (%) trend Exhibit 8: RAC and Components - Revenue, margin trend
100% (Rs bn) (%)
5 4 6 4 5 5 FY20-23 CAGR: 20%
6 7 7 6 6 6 80 10
FY23-25E CAGR: 15%
16 15 15 16 18 19
75%
15 60 8
20 7.9 5.8
25 30 7.5
30 30
50% 6.5
40 5.8 5
5.6
59 54
25% 48 20 3
43 41 40
29.3 22.5 30.7 50.7 56.9 66.6
0% 0 0
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E
RAC Components Electronic PCB Mobility Motors Revenue EBITDA margin (RHS)
Exhibit 9: Motors - Revenue, margin trend Exhibit 10: Electronic PCBs - Revenue, margin trend
(Rs bn) (%) (Rs bn) (%)
6.0 FY20-23 CAGR: 18% 16 24 6
13.7 FY20-23 CAGR: 22%
FY23-25E CAGR: 22% FY23-25E CAGR: 27%
11.5 12.0
4.5 10.6 12 18 5
4.4 4.5 4.5 4.5
8.0 4.2
4.0
3.0 8 12 3
5.4
1.5 4 6 2
1.9 1.3 2.4 3.1 3.8 4.6 6.2 4.6 6.2 11.3 14.6 18.3
0.0 0 0 0
Revenue EBITDA margin (RHS) Revenue EBITDA margin (RHS)
Exhibit 11: Mobility - Revenue, margin trend

(Rs bn) (%)
FY20-23 CAGR: 23%
8 30
FY23-25E CAGR: 16%
6 24.8 25.0 25.0 23

23.2 23.4
22.0
4 15
2 8
2.3 2.0 2.9 4.2 4.9 5.7

0 0
Revenue EBITDA margin (RHS)
Components business to scale up fast; RAC market share gains continue

Exhibit 12: AMBER - Transforming into an end-to-end component supplier as share of Components rises
Source: Company
Exhibit 13: AMBER’s increasing RAC and RAC Component market share
Source: Amber * company estimates # RAC components include sheet metal, injection molding, copper, heat exchangers, motors, PCBA and cross-flow fans ^ excl. GST
Manufacturing footprint – focus on backward integration and being close to customers

Exhibit 14: Strategically located manufacturing facilities (till Jun’22)
Source: Company
Exhibit 15: Focus on backward integration and being close to customers
Source: Company
Recent financial performance…

Exhibit 16: AMBER Enterprises – recent financial performance (consolidated)
(Rs mn) 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 YoY (%) QoQ (%) FY23 FY22 YoY (%)
Total Income 19,367 18,257 7,504 13,483 30,026 55 123 69,271 42,064 65
Raw material costs 16,699 15,635 5,924 11,185 25,933 55 132 58,678 35,297 66
Employee costs 427 459 476 542 638 49 18 2,116 1,500 41
Other expenses 988 1,171 737 971 1,420 44 46 4,298 2,514 71
EBITDA 1,253 992 367 785 2,035 62 159 4,179 2,754 52
Depreciation 302 322 318 363 388 28 7 1,391 1,079 29
Finance costs 186 211 244 289 375 102 30 1,118 464 141
Other income 94 128 122 89 187 99 109 527 332 58
PBT 859 589 (73) 222 1,459 70 557 2,196 1,543 42
Tax 266 160 (50) 71 378 42 430 559 429 30
PAT 593 429 (23) 151 1,081 82 617 1,638 1,113 47
EPS (Rs) 17.0 12.5 (0.9) 4.2 30.9 82 635 46.7 32.4 44
As % total income YoY (bps) QoQ (bps) YoY (bps)
Gross margin 13.8 14.4 21.1 17.0 13.6 (15) (341) 15.3 16.1 (80)
Employee costs 2.2 2.5 6.3 4.0 2.1 (8) (189) 3.1 3.6 (51)
Other expenses 5.1 6.4 9.8 7.2 4.7 (37) (247) 6.2 6.0 23
EBITDA margin 6.5 5.4 4.9 5.8 6.8 31 95 6.0 6.5 (51)
Depreciation 1.6 1.8 4.2 2.7 1.3 (27) (140) 2.0 2.6 (56)
EBIT margin 4.9 3.7 0.6 3.1 5.5 58 235 4.0 4.0 4
Finance costs 1.0 1.2 3.2 2.1 1.2 29 (90) 1.6 1.1 51
Other income 0.5 0.7 1.6 0.7 0.6 14 (4) 0.8 0.8 (3)
PBT 4.4 3.2 (1.0) 1.6 4.9 43 321 3.2 3.7 (50)
Effective tax rate 30.9 27.1 68.7 32.1 25.9 (502) (621) 25.4 27.8 (240)
PAT 3.1 2.3 (0.3) 1.1 3.6 54 248 2.4 2.6 (28)
Segment Revenues YoY (%) QoQ (%) YoY (%)
RAC 10,020 10,530 1,590 3,533 14,306 43 305 29,950 20,128 49
Components 5,110 3,870 1,980 5,520 9,411 84 70 20,781 10,516 98
Motors 800 830 470 720 1,050 31 46 3,070 2,360 30
Electronics 2,450 2,080 2,410 2,610 4,150 69 59 11,250 6,170 82
Mobility Application 820 950 1,050 1,100 1,130 38 3 4,220 2,890 46
Revenue Mix (%) YoY (bps) QoQ (bps) YoY (bps)
RAC 52.2 57.7 21.2 26.2 47.6 (458) 2,141 43.2 47.9 (461)
Components 26.6 21.2 26.4 40.9 31.3 471 (962) 30.0 25.0 500
Motors 4.2 4.5 6.3 5.3 3.5 (67) (185) 4.4 5.6 (118)
Electronics 12.8 11.4 32.1 19.4 13.8 105 (555) 16.2 14.7 157
Mobility Application 4.3 5.2 14.0 8.2 3.8 (51) (440) 6.1 6.9 (78)
KTAs from management interview and earnings concall

Leader in all key segments (market share): RAC manufacturing (29%), Motor
components (27%), Sheet metal (35-40%), Cross-flow fans (25%)
Heat exchanger: manufactured inhouse by OEMs; AMBER enjoys high market share
in outsourcing
Guidance for FY24 and outlook
• Capacity and customer addition, and market-share gains to drive growth
• RAC and Components division expected to outpace industry growth in FY24. RAC
industry expected grow at <10% to ~9mn units vs. 8.4mn units in FY23.
• Mobility Application, Electronics and Motors divisions expected to expand at 15-
20%, 35-40% and 30-35%, respectively.
• Aims to achieve ~20% RoCE in 2-3 years from <15% in FY23.
• Aims for ~Rs 3.8bn capex in FY24 (FY23: ~Rs 7bn) towards brownfield expansion
in components, R&D, subsidiaries, etc.
• 65-70% capacity utilisation across divisions; benefits of most of the capex
incurred in 2HFY23 should fully reflect in FY24; to receive PLI incentive soon.
RAC and Components division

• FY23 revenue up 65% YoY; EBITDA margin 5.6%.
• Continues to gain market share in RAC manufacturing (29%).
• Realigned strategy to offer comprehensive solutions in components, in tandem
with RAC customers’ strategy to insource.
• Converted customers for gas charging into complete product solution
Mobility division
• FY23 revenue up 46% YoY, EBITDA margin 23.4%.
• Strong order book (Rs 7bn+); Pantry systems for Vande Bharat Express started.
• Defense application business seeing robust growth.
• Expanding wallet share with existing customers.
Electronics division
• Wearable segment witnessing strong growth.
• Pilot lot of telecom product has started.
• Onboarded new customers in the wearable and telecom sectors.
• RAC-PCBA market share crosses 20% and is growing consistently.
Motor division
• Expanding BLDC motors in outdoor units, window ACs and commercial segments.
• In advanced stages to add marquee clients in exports.
• Developing motors for new applications.
AMBER ENTERPRISES (FINANCIALS)

Profit & Loss Statement Balance Sheet
YE: Mar (Rs mn) FY21 FY22 FY23 FY24E FY25E YE: Mar (Rs mn) FY21 FY22 FY23 FY24E FY25E
Net revenues 30,305 42,064 69,271 80,223 95,155 Share capital 337 337 337 337 337
Growth (%) (24) 39 65 16 19 Net worth 16,041 17,342 19,088 21,194 24,210
Raw material expenses 25,135 35,297 58,678 67,794 80,223 Total debt 3,844 10,318 13,437 12,237 11,137
Gross Margin (%) 17.1 16.1 15.3 15.5 15.7 Minority interest 365 387 452 452 452
Employee & Other exp. 2,967 4,013 6,414 7,123 8,192 DT Liability/ (Asset) 770 954 947 989 1,032
EBITDA 2,203 2,754 4,179 5,305 6,740 Capital Employed 21,020 29,001 33,924 34,873 36,831
EBITDA margins (%) 7.3 6.5 6.0 6.6 7.1 Net tangible assets 7,864 10,791 17,891 20,144 21,202
Depreciation 923 1,079 1,391 1,746 1,942 Net Intangible assets 3,722 4,487 4,698 4,698 4,698
Other income 331 332 527 330 292 Goodwill - - - - -
Finance costs 410 464 1,118 907 830 CWIP 288 1,056 130 130 130
PBT 1,201 1,543 2,197 2,982 4,261 Investments (Strategic) - - - - -
Effective tax rate (%) 30.7 27.8 25.4 25.4 25.4 Investments (Financial) 1,080 2,254 1,934 1,934 1,934
Associates/(Minorities) 1 2 3 3 3 Current Assets 19,993 24,882 32,155 36,698 42,952
Net Income 816 1,092 1,572 2,173 3,117 Cash 2,900 5,626 5,594 3,351 2,925
Adjusted net income 816 1,092 1,572 2,173 3,117 Current Liabilities 14,827 20,095 28,478 32,082 37,011
Shares outstanding 34 34 34 34 34 Working capital 5,166 4,788 3,677 4,615 5,941
FDEPS (Rs) 24.2 32.4 46.7 64.5 92.5 Capital Deployed 21,020 29,001 33,924 34,873 36,831
FDEPS growth (%) (52) 34 44 38 43 Contingent Liabilities 26 24 - - -
Source: Company, Systematix Institutional Research Source: Company, Systematix Institutional Research
Cash Flow Ratios @ Rs 2,214

YE: Mar (Rs mn) FY21 FY22 FY23 FY24E FY25E YE: Mar FY21 FY22 FY23 FY24E FY25E
EBIT (incl. other income) 1,446 1,929 2,935 3,559 4,798 P/E (x) 91.4 68.3 47.5 34.3 23.9
Non-cash items 923 1,079 1,391 1,746 1,942 EV/EBITDA (x) 33.8 28.0 19.3 15.4 12.0
OCF before WC changes 2,369 3,008 4,327 5,305 6,740 EV/sales (x) 2.5 1.8 1.2 1.0 0.8
Incr./(decr.) in WC 80 62 582 938 1,326 P/B (x) 4.7 4.3 3.9 3.5 3.1
Others including taxes 79 539 539 716 1,042 RoE (%) 5.1 6.3 8.2 10.3 12.9
Operating cash-flow 2,210 2,407 3,206 3,651 4,372 RoCE (%) 10.7 11.1 13.3 12.5 14.7
Capex 1,711 4,077 6,535 4,000 3,000 ROIC (%) 9.3 8.6 12.5 13.6 16.4
Free cash-flow 499 (1,670) (3,329) (349) 1,372 DPS (Rs per share) - - - - -
Acquisitions - 120 - - - Dividend yield (%) - - - - -
Dividend - - - 67 101 Dividend payout (%) - - - - -
Equity raised 4,000 (0) - - - Net debt/equity (x) (0.0) 0.1 0.3 0.3 0.3
Debt raised 151 6,007 3,089 (1,200) (1,100) Receivables (days) 129 114 93 90 90
Fin Investments 1,568 3,011 (1,337) - - Inventory (days) 86 73 58 60 60
Misc. Items (CFI + CFF) 1,983 260 851 627 597 Payables (days) 159 148 121 121 121
Net cash-flow 1,099 1,186 246 (2,243) (426) CFO:PAT% 271 220 204 168 140
Systematix
Avalon Technologies 12 July 2023
Fully-integrated EMS player with high US exposure

INITIATING COVERAGE We initiate coverage on Avalon Technologies (AVALON) with a BUY rating and a
Sector: EMS Rating: BUY target price of Rs 752, based on 40x FY25E EPS of Rs 19. After a soft FY23
(revenue/EBITDA up 12%/16%, PAT down 17% YoY), management aims to at least
CMP: Rs 620 Target Price: 752
double its revenue over the next three years, led by 30-40% CAGR in its Aerospace
Stock Info and Clean Energy verticals. The company expects order book and revenue build up
Sensex/Nifty 65,618/19,439 from the marquee clients and projects it has acquired in the last six months.
Bloomberg AVALON IN Current low plant utilisation (~60%), ~Rs 600mn capex over next two years and
Equity shares (mn) 58 high asset turnover (~10x) provide strong headroom for growth. AVALON also aims
52-wk High/Low 627/357 to reduce its Net Working Capital (NWC) days (148 currently) by 10-15 days on
Face value Rs 2 lower inventory days, and thus improve its cash flows. A healthy order book (Rs
M-Cap Rs 36bn/ USD 438mn 12.3bn, 1.3x FY23 revenue) and 25%+ RoIC are other positives. Post 14%/20%/66%
3-m avg turnover USD 2.9mn
CAGR in revenue/ EBITDA/ PAT over FY20-23, we estimate 22%/24%/44% CAGR
Financial Snapshot (Rs mn) over FY23-25E, with ~250bps expansion in its RoIC to 26% in FY25E.
Y/E Mar FY23 FY24E FY25E Company profile: Avalon Technologies (AVALON) was incorporated in 1999 as a
Net sales 9,447 11,750 14,160
pure-play PCB assembler for ABV Electronics Inc, USA. Since then, it has transformed
EBITDA 1,128 1,426 1,747
itself into a fully-integrated EMS company with end-to-end operations in delivering
OPM % 11.9 12.1 12.3
PAT (adj.) 525 883 1,090
box-build solutions in India, focusing on high-value precision-engineered products. Its
EPS (adj.) (Rs) 9.1 15.2 18.8 current offerings include sheet metal fabrication, cable assembly and wire harnesses,
PE (x) 68.4 40.7 33.0 magnetics, electromechanical assemblies, injection-molded plastics, along with in-
P/B (x) 6.7 5.7 4.9 house design capabilities for various customers across industries. The company has
EV/EBITDA (x) 31.1 24.7 20.1 12 manufacturing units across India and the US (2 units; only Indian EMS company to
RoE (%) 9.8 14.1 14.8 have full-fledged manufacturing facilities in the US). AVALON enjoys long-standing
RoCE (%) 17.3 16.2 18.6 relationships (>7 years) with its key customers, and has expanded its customer base
Net-D/E (x) (0.2) (0.1) (0.1) to ~90, with optimal revenue mix (US 59%, India 41%).
Shareholding Pattern (%) Revenue mix across verticals (FY23): Industrials (29%), Clean energy (25%), Mobility
Mar'23 / Transportation (21%), Communication (11%) and Medical and Others (13%)
Promoter 70.7
Revenue mix across segments (FY22): Box build (44%, 47% in FY23), PCB (35%),
- Pledged
Cables (10%), Metal (4%), Magnetics (3%), Design (2%) and Plastics (1%)
FII
DII - Financial highlights: FY23 was a soft year for AVALON, as its consolidated revenue/
Others 29.3 EBITDA grew at 12%/ 16% to Rs 9.5bn /Rs 1.1bn, while PAT declined 17% YoY to Rs
0.5bn. EBITDA margin expanded 34bps YoY to 11.9%, while PAT margin fell 247bps
Stock Performance (1-year)
675
YoY to 5.6% on inflamed ETR (27.8% vs. 21.2% in FY22) and interest (up 40% YoY).
Management guidance: AVALON’s asset-light model has led to high asset turnover
581
and thus 25%+ RoIC, with order book currently at Rs 12.3bn (1.3x FY23 revenue),
488
which provides robust growth outlook. Management aims to at least double its
394 revenue over the next three years, led by 30-40% CAGR in its Aerospace and Clean
300 Energy verticals. Current ~60% capacity utilisation, Rs 350mn/Rs 250mn of FY24/
Apr-23
Jun-23
Jul-23
May-23
FY25 capex at Chennai facility, and ~10x asset turnover provide strong headroom for
growth. Acquired marquee clients and projects in last six months should aid order
AVALON Sensex book and revenue build up. It aims to reduce the NWC days (148) by 10-15 on lower
inventory, and thereby improve cash flows.
Outlook and View: Post 14%/20%/66% CAGR in revenue/EBITDA/PAT over FY20-23,
we estimate 22%/24%/44% CAGR over FY23-25E, with ~250bps expansion in its RoIC
to 26% in FY25E. With a positive outlook, we initiate coverage on AVALON with a
BUY rating, and a target price of Rs 752, based on 40x FY25E EPS of Rs 19.
12 July 2023 Avalon Technologies
Story in charts
(Rs bn) (%) (%)
35.9 34.1 35.8 36.0 36.2
16 FY20-23 CAGR: 14% 14.2 40 34.0 15
FY23-25E CAGR: 22% 11.7
12 30 11
9.4 11.6 11.9 12.1 12.3
8.4 20 10.0 8
6.9 9.6
8 6.4
7.5 7.5 7.7
10 1.8 4
5.6
4
0 3.1 0
0
Exhibit 3: PAT growth trend Exhibit 4: Net-WC cycle trend

(Rs mn) (%) (Days)
1,200 FY20-23 CAGR: 66% 10 200
148
7.7
138
7.5 7.5
133
127
FY23-25E CAGR: 24%
123
8
113
108
106
900 150
101
5.6
96
88
6
80
80
80
77
77
77
76
67
100
65
600 3.1
55
55
55
51
4
1.8
1,090
300 50
883
2
215
632
525
115
0 0 0
Exhibit 5: RoIC, RoE trend Exhibit 6: Net-Debt/Equity trend

(%) (x)
100 12
72
75 5.2
7 4.6
3.5
50 36
25 26 26 26 (0.2) (0.1) (0.1)
2
25
27 27 10 15
0 22 14 (3)
ROE ROIC (8)
Exhibit 7: Revenue mix trend (segment-wise) Exhibit 8: Revenue mix trend (India & Overseas)
100% 7 7 7
11 9 8 100 6 3
8 8 7 7 7
8 7 11 11 11
75% 6 8 33 38 41
75 34
29 27 21 22 22
31
50% 50
18 20 25 26 26
16 60 64 62 59
25% 25
28 29 30 29 28 28
0
0% FY20 FY21 FY22 FY23
U.S.A India Others
Industrial Clean Energy Mobility Communication Medical Others
Diversified portfolio; growing fast in Clean Energy vertical

Exhibit 9: Presence across multiple industries with a diversified customer base
Source: Company
Exhibit 10: AVALON’s journey – diversification-led growth
Source: Company
A complete product offering with a long product life-cycle

Exhibit 11: Fully integrated end-to-end product offerings
Margin profile
Low High
Exhibit 12: High precision product offerings across industries, with long product development cycles
Source: Company
Focus on fast growing India and US markets; relatively low concentration risk among peers
Exhibit 13: AVALON’s growth strategy
Source: Company
Exhibit 14: AVALON – Low customer concentration risk

(Rs mn) FY20 FY21 FY22 8MFY23
Largest customer 689 836 1,091 585
% of revenue 11 12 13 10
Top-2 1,361 1,571 2,174 1,098
% of revenue 21 23 26 18
Top-5 2,983 3,386 4,228 2,217
% of revenue 46 49 50 37
Top-10 4,140 4,578 5,499 3,219
% of revenue 63 66 65 54
Source: Company

Exhibit 15: AVALON – recent financial performance (consolidated)
(Rs mn) 4QFY22 3QFY23 4QFY23 YoY (%) QoQ (%) FY23 FY22 YoY (%)
Total Income 2,097 2,327 2,718 30 17 9,447 8,407 12
Raw material costs 1,367 1,517 1,700 24 12 6,067 5,541 9
Employee costs 334 411 427 28 4 1,605 1,314 22
Other expenses 161 197 180 12 (8) 647 577 12
EBITDA 236 202 411 74 103 1,128 975 16
Depreciation 48 50 52 8 3 197 180 9
Finance costs 83 86 95 15 11 348 248 40
Other income 34 12 38 9 207 144 109 31
Exceptional gain/(loss) - - - - - - 200 -
PBT 139 78 302 117 286 727 856 (15)
Tax 33 21 75 128 257 202 182 11
PAT (before JV/Asso./NCI) 107 57 227 113 296 525 675 (22)
Non-controlling stake (1) - - (100) na - (43) na
PAT (after JV/Asso./NCI) 105 57 227 116 296 525 632 (17)
EPS (Rs) 13.2 1.0 3.9 (70) 287 9.1 10.9 (17)
As % Total Income YoY (bps) QoQ (bps) YoY (bps)
Gross margin 34.8 34.8 37.5 265 266 35.8 34.1 169
Emp cost 15.9 17.7 15.7 (21) (195) 17.0 15.6 137
Other exp 7.7 8.5 6.6 (102) (183) 6.8 6.9 (2)
EBITDA margin 11.2 8.7 15.1 388 644 11.9 11.6 34
Dep 2.3 2.2 1.9 (39) (26) 2.1 2.1 (6)
Interest 3.9 3.7 3.5 (45) (18) 3.7 3.0 73
Other income 1.6 0.5 1.4 (25) 86 1.5 1.3 22
Effective tax rate 23.5 26.7 24.7 121 (198) 27.8 21.2 656
PAT margin 5.1 2.5 8.4 327 589 5.6 8.0 (247)

FY23 performance
• Revenue up 12.4% YoY, EBITDA up 16% YoY with 11.9% margin, PAT up 11% YoY.
• Revenue mix (FY22): Clean energy 25% (20%), Industrial 29% (30%), Mobility 21%
(27%), Communication 11% (7%), Medial & others 13% (16%).
• Box Build revenue mix 47%.
4QFY23 performance
• Revenue up 30% YoY, EBITDA expanded 388bps YoY to 15.1%, PAT up 113% YoY.
• Margin expanded on richer product mix; 12-13% margin sustainable in the long
term.
Guidance and outlook

• Aims to double revenue in 3 years.
• Aerospace and Clean energy - fastest growing segments with 30-40% CAGR.
• Growth drivers: (1) optimal mix of customer base across India, US and other
geographies; (2) optimal balance between profitability and growth, with
thoughtful investments in product-manufacturing capabilities; and (3) optimal
mix of the presently established industries like Industrial, Mobility &
Communication and emerging industries like Clean energy.
• Order book: Rs 12.3bn (1.3x FY23 revenue) vs. Rs 8.6bn in Mar 2022
• Domestic revenue (41% mix from 20% few years ago) is growing faster than the
US (59% mix) business.
• Marquee clients and projects added in last six months to aid in FY24 revenue.
• Won new businesses from world’s largest aerospace conglomerate, including
factory transfer projects.
• Aims to reduce NWC cycle by 10-15 days on lower inventories.
• Repaid Rs 2bn debt from IPO proceeds.
• India entity likely to be debt free by end FY24.
Capex
• FY24/FY25 capex at Rs 350mn/Rs 250mn, respectively, on Chennai facility; ~10x
asset turnover.
• Current capacity utilisation at ~60%; hence, 45% growth seems achievable.
• Over 70% of the company’s manufacturing capacity is located in India.
AVALON TECHNOLOGIES (FINANCIALS)

Growth (%) 8 22 12 24 21 Net worth 599 872 5,370 6,253 7,343
Direct costs 4,560 5,541 6,067 7,523 9,037 Total debt 3,115 3,130 3,365 2,315 1,765
Gross Margin (%) 34.0 34.1 35.8 36.0 36.2 Minority interest (317) - - - -
SG&A 1,683 1,890 2,252 2,801 3,375 DT Liability/(Asset) (232) (164) (130) (89) (47)
EBITDA 661 975 1,128 1,426 1,747 Capital Employed 3,165 3,839 8,604 8,479 9,061
- Depreciation 157 180 197 244 295 Net Intangible assets 8 6 24 24 24
Interest Exp 270 248 348 204 179 CWIP - 20 153 133 113
PBT 288 856 727 1,178 1,453 Investments (Strategic) - - - - -
Effective tax rate (%) 19.9 21.2 27.8 25.0 25.0 Investments (Financial) - - - - -
+ Associates/(Minorities) (16) (43) - - - Current Assets 3,516 4,472 6,022 7,098 8,295
Net Income 215 632 525 883 1,090 Cash 335 101 4,222 3,057 2,543
Adjusted income 215 632 525 883 1,090 Current Liabilities 1,728 1,878 3,068 3,339 3,626
WANS 8 8 58 58 58 Working capital 1,789 2,595 2,954 3,759 4,669
FDEPS (Rs) 4 11 9 15 19 Capital Deployed 3,165 3,839 8,604 8,479 9,061
FDEPS growth (%) 86 194 (17) 68 23 Contingent Liabilities 43 36 - - -
Cash Flow Ratios @ Rs 620

EBIT (incl. other income) 494 907 984 1,182 1,453 P/E (x) 167.2 56.8 68.4 40.7 33.0
+ Non-cash items 157 180 197 244 295 EV/EBITDA (x) 58.5 39.9 31.1 24.7 20.1
OCF before WC changes 651 1,087 1,181 1,426 1,747 EV/sales (x) 5.6 4.6 3.7 3.0 2.5
- Incr./(decr.) in WC 560 805 1,125 805 910 P/B (x) 8.3 5.7 6.7 5.7 4.9
Others including taxes 36 125 189 253 322 RoE (%) 35.9 72.5 9.8 14.1 14.8
Operating cash-flow 55 157 (133) 368 515 RoCE (%) 19.8 25.8 17.3 16.2 18.6
- Capex 192 177 273 480 480 ROIC 21.8 27.4 23.5 26.1 26.0
Free cash-flow (137) (21) (406) (112) 35 DPS (Rs per share) - - - - -
Acquisitions Dividend yield (%) - - - - -
- Dividend 37 38 37 - - Dividend payout (%) - - - - -
+ Equity raised 73 - 798 - - Net debt/equity (x) 4.6 3.5 (0.2) (0.1) (0.1)
+ Debt raised 461 86 48 (1,050) (550) Receivables (days) 96 77 80 80 80
- Fin Investments 78 11 - - - Inventory (days) 77 101 123 113 108
- Misc. Items (CFI + CFF) 215 252 (3,739) 4 (1) Payables (days) 67 51 55 55 55
Net cash-flow 67 (236) 4,141 (1,166) (514) CFO:PAT% 26 25 (25) 42 47
Systematix
Dixon Technologies 12 July 2023
Largest and immensely diversified Indian EMS player

INITIATING COVERAGE We initiate coverage on Dixon Technologies (DIXON) with a BUY rating, and a
Sector: EMS Rating: BUY target price of Rs 4,966, based on 60x FY25E EPS of Rs 83. In FY23, while revenue
grew by a low 14% YoY, EBITDA/PAT rose 35%/34% YoY on 66bps expansion in
EBITDA margin to 4.2%. RoE (~20%) and RoCE (30%+) have been quite healthy,
Stock Info aided by high asset-turnover (~8x) and low NWC days (7). For FY24, management
Sensex/Nifty 65,618/19,439 has guided 15-20% revenue growth, to be led by mobile & EMS and home
Bloomberg DIXON IN appliances divisions and ~4.5% EBITDA margin. Price reduction will likely restrict
Equity shares (mn) 59.4 growth in the lighting division to 12-15%, despite aggressive product launches and
52-wk High/Low 4,655/2,642 export orders from the UAE, Germany, the US and UK. A superior product mix,
Face value Rs 2 operating leverage benefits, cost optimisation and price hikes in ODM should drive
M-Cap Rs 257bn/ USD 3.1bn overall EBITDA margin (to ~4.5%). It plans to incur a capex of ~Rs 4bn, largely in the
3-m avg turnover USD 29mn
refrigeration and mobile segments. Post 40%/32%/28% CAGR in revenue/
Financial Snapshot (Rs mn) EBITDA/PAT over FY20-23, we estimate 23%/27%/39% CAGR over FY23-25E with
Y/E Mar FY23 FY24E FY25E 300-500bps expansion in RoE/RoCE/RoIC to ~23%/32%/36% in FY25E.
Net sales 1,21,920 1,52,667 1,85,858
EBITDA 5,127 6,680 8,300 Company profile: Dixon Technologies (DIXON) is India’s largest home-grown
OPM % 4.2 4.4 4.5 diversified and fully-integrated EMS player. The company commenced operations in
PAT (adj.) 2,551 3,850 4,928 1993 with colour TVs, and now has a wide range of product offerings in several
EPS (adj.) (Rs) 42.8 64.6 82.8 verticals such as consumer electronics (mobile phones, CCTV, etc.), lighting products
PE (x) 100.9 66.8 52.2 and home appliances (LED TV, washing machine, refrigeration, etc). It is also a
P/B (x) 20.0 15.5 12.1 leading Original Design Manufacturing (ODM) of lighting products, LED TVs and semi-
EV/EBITDA (x) 50.0 38.2 30.3 automatic washing machines in India. Motorola, Xiaomi and Samsung are its largest
RoE (%) 19.9 23.2 23.1
customers. DIXON also undertakes reverse logistics operations and manufactures
RoCE (%) 27.2 31.9 32.2
security surveillance equipment. Recently, the company entered into a JV with
Net-D/E (x) (0.0) (0.0) (0.0)
Imagine Marketing to design and manufacture wireless audio solutions.
Mar'23 Dec'22 Sep'22 Revenue mix across verticals (FY23): Mobile & EMS (43%), Consumer Electronics
Promoter 34.3 34.1 34.9 (35%), Lighting (9%), Home Appliances (9%) and Security Systems (4%).
- Pledged Financial highlights: FY23 consolidated revenue/EBITDA/PAT grew at 14%/35%/34%
FII 16.3 16.7 18.4
YoY to Rs 122bn, Rs 5.1bn and Rs 2.6bn, respectively. EBITDA and PAT margins
DII 18.6 18.9 8.7
Others 30.9 30.4 37.9
expanded 66bps and 30bps YoY to 4.2% and 2.1%, respectively. Despite low margins,
RoE (~20%) and RoCE (30%+) have been quite healthy, aided by high asset-turnover
Stock Performance (1-year) (~8x) and low NWC days (7).
5,000
Management guidance: Management has guided healthy 15-20% revenue growth
4,250
for FY24, to be led by mobile & EMS and home appliances divisions. Price reduction
3,500 will likely restrict growth in the lighting division to 12-15%, despite aggressive
2,750 product launches and export orders from the UAE, Germany, the US and UK. A
superior product mix, operating leverage benefits, cost optimisation and price
2,000
hikes in ODM should drive overall EBITDA margin (to ~4.5%). It may incur a capex of
Oct-22
Jan-23
Nov-22
Apr-23
Jul-22
Jul-23
Aug-22
May-23
Feb-23
~Rs 4bn, largely in the refrigeration and mobile segments.

DIXON Sensex Outlook and View: Post 40%/32%/28% CAGR in revenue/EBITDA/PAT over FY20-23,
we estimate 23%/27%/39% CAGR over FY23-25E with 300-500bps expansion in its
RoE/RoCE/RoIC to ~23%/32%/36% in FY25E. With a positive outlook, we initiate
coverage with a BUY rating and a target price of Rs 4,966, based on 60x FY25E EPS
of Rs 83.
12 July 2023 Dixon Technologies
Story in charts
(Rs bn) (%) (%)
200 185.9 15 10
FY20-23 CAGR: 40% 12.3
FY23-25E CAGR: 23%
152.7 10.5
11 9.6 9.7 9.7 8
150 8.6
121.9
107.0 8 5
100 5.1
4.4 4.2 4.4 4.5
64.5 4 3.5 3
44.0 2.7 2.5 2.5 2.7
50 1.8 2.1
0 0
0 Gross margin EBITDA margin (RHS) PAT margin (RHS)
Exhibit 3: PAT growth trend Exhibit 4: Net-WC cycle trend

(Rs bn) (%) (Days)
6.0 FY20-23 CAGR: 29% 4 120
FY23-25E CAGR: 39%
97
4.5 2.7 2.7 3
79
90
78
2.5 2.5
73
73
73
2.1
62
51
51
1.8
51
3.0 2 60
46
43
42
41
39
29
29
29
1.5 1 30
7
7
7
7
7
6
1.2 1.6 1.9 2.6 3.8 4.9
0
0.0 0
Debtor Days Inventory Days Creditor Days Net-WC Days
Exhibit 5: RoIC, RoE trend Exhibit 6: Net-debt/Equity trend

(%) (x)
40 37 37 36 0.50
35
32 0.3
33
28 0.25
0.1
25 (0.0) (0.0) (0.0) (0.0)

0.00
22 23 23
18 22
19 20
(0.25)
10
(0.50)
ROE ROIC
Exhibit 7: Revenue mix trend Exhibit 8: Consumer Electronics - Revenue, margin trend
100% (Rs bn) (%)
5 3 4 4 4 4
12 9 8 8 80 10
17 FY20-23 CAGR: 27%
26 7 9 9 9
75% 7 FY23-25E CAGR: 25%
9 60 8
35 36 36
50% 48
60 40 3.8 5
48 3.6
3.1
25% 2.4 2.7 2.4
43 43 44
29 20 3
12 13
0% 21.1 38.6 51.7 42.8 55.6 66.7
FY20 FY21 FY22 FY23 FY24E FY25E 0 0
Mobile & EMS Consumer Electronics Home Appliances FY20 FY21 FY22 FY23 FY24E FY25E
Lighting Security Systems Revenue EBITDA margin (RHS)
Exhibit 9: Lighting - Revenue, margin trend Exhibit 10: Home Appliances - Revenue, margin trend
(Rs bn) (%) (Rs bn) (%)
20 20 20 20
FY20-23 CAGR: -3% FY20-23 CAGR: 42%
FY23-25E CAGR: 15% FY23-25E CAGR: 20%
15 15 15 15
11.6
9.2 9.5 9.5 9.5
10 10 10 7.6 10
8.6 8.8 8.6 8.6 8.6

5 6.9 5 5 5
11.4 11.0 12.8 10.6 12.1 14.0 4.0 4.3 7.1 11.4 13.7 16.5
0 0 0 0
Exhibit 11: Mobile & EMS - Revenue, margin trend Exhibit 12: Security System - Revenue, margin trend
(Rs bn) (%) (Rs bn) (%)
100 8 10.0 6
FY20-23 CAGR: 113% FY20-23 CAGR: 31%
FY23-25E CAGR: 25% FY23-25E CAGR: 20%
75 6 7.5 3.8 5
4.7 3.3 3.4
3.0 3.2
3.6 2.8
50 3.2 3.3 3.4 4 5.0 3
3.1
25 2 2.5 2
5.4 8.4 31.4 52.2 65.3 81.6 2.2 2.2 4.0 4.9 5.9 7.1
0 0 0.0 0
DIXON's journey so far…

Exhibit 13: Key milestones – rapid enhancement of product basket aided in quick revenue scale up..
Year Milestones
1994 Commenced manufacturing colour televisions
1996 Established Noida I facility
2007 Commenced manufacturing LCD TVs
Entered the lighting product vertical by manufacturing CFL products
2008 Private equity investment by IBEF and IBEF 1
Commenced reverse logistics operations
2009 Commenced commercial manufacturing in the metal sheet and moulding segments through subsidiary, DBMPL
2010 Commenced manufacturing washing machines through subsidiary DAPL, and started manufacturing LED TVs
2015 Acquired the remaining shareholdings of subsidiaries, DAPL and DBMPL
2016 Commenced manufacturing mobile phones through its JV Padget Electronics
2016 Granted approval by government of Andhra Pradesh to set up a manufacturing facility in Tirupati
2017 Amalgamated DAPL and DBMPL into the company
2017 Entered into a JV with Aditya Infotech Limited to manufacture security systems, as also CCTVs and DVRs through its JV, ADTPL
Commenced manufacturing of security systems (CCTVs and DVRs) through its JV, AIL Dixon Technologies Pvt Ltd (ADTPL)
2018
Commenced production of the Liquid Crystal Module (LCM) Line at Tirupati
2019 Padget Electronics became a wholly-owned subsidiary
2020 Commenced manufacturing of medical equipment
Signed an MoU with Bharti group for manufacturing telecom & networking products
2022 Formed a JV with Imagine Marketing (BoAt) to manufacture bluetooth-enabled audio devices
Formed a JV with Rexxam Co. to manufacture PCBAs
Source: Company Annual Reports
Exhibit 14: Manufacturing footprint

Location Products manufactured
LED bulbs, PCB assembly of air conditioners
Mobile phones
LED bulbs
Noida LED bulbs and parts
(Uttar Pradesh) Mobile phones
Lighting products
Mobile phones
Mobile phones, Laptops
LED bulbs, battens, T-LEDs, down lighters, ballast, etc.
Washing machines
Dehradun Plastic parts and sheet metal components
(Uttarakhand) Plastic parts and sheet metal components
LED bulb repairing
Washing machines
CCTVs and DVRs
Chittoor
LED TVs & reverse logistics
(Andhra Pradesh)
Washing machines
Ludhiana (Punjab) Telecoms
Source: Company Annual Reports
Comprehensive product portfolio for large customer base

Exhibit 15: Segment-wise business performance
Revenue (Rs bn) EBITDA margin (%) RoCE (%)
FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23 FY24E FY25E FY20 FY21 FY22 FY23
Consumer Electronics 21.0 38.4 51.6 42.8 55.6 66.7 2.4 2.7 2.4 3.1 3.6 3.8 46 168 213 89
Lighting 11.4 11.0 12.8 10.6 12.1 14.0 8.6 8.8 6.9 8.6 8.6 8.6 37 29 22 29
Home Appliances 4.0 4.3 7.1 11.4 13.7 16.5 11.6 9.2 7.6 9.5 9.5 9.5 30 21 18 30
Mobile & EMS 5.4 8.4 31.4 52.2 65.3 81.6 3.6 4.7 3.1 3.2 3.3 3.4 31 21 21 31
Security Systems 2.2 2.2 4.0 4.9 5.9 7.1 3.3 2.8 3.8 3.0 3.2 3.4 36 26 55 39
Exhibit 16: Summary of DIXON’s product portfolio expansion

Year Product
1994 Colour TVs
2007 LCD TV
2008 CFL lighting & reverse logistics
2010 LED TV & washing machines
2016 Mobile phones
2017 CCTVs and DVRs
2019 Set top box
2020 Top load washing machines and medical electronics
2021 IT hardware
2022 Telecom and networking products, wearables & hearables
2023 Refrigerators
Source: Company
Exhibit 17: Rising share of high-margin ODM business

Years Consumer Electronics Lighting Products Home Appliances
FY23 23% 90% 100%
FY22 4% 91% 100%
FY21 5% 90% 100%
FY20 6% 87% 100%
FY19 9% 71% 100%
FY18 6% 40% 100%
FY17 12% 45% 100%

Source: Company
Exhibit 18: DIXON’s key customers across product segments
Products Key customers
Xiaomi, Samsung, Panasonic, Philips, Hisense, Nokia, Flipkart,

LED TV
Lloyd, VU, Reliance, TCL, Toshiba, BPL
Reverse logistics Panasonic, Xiaomi, Airtel, Dish TV, Mitashi, Vijay Sales
AC inverter controller PCB Daikin
Philips, Panasonic, Wipro, Bajaj, Luker, Luminous, Crompton, C&S,

Lighting products
Orient, Polycab, Syska, Havells, Usha
Panasonic, Samsung, Godrej, Bosch, Weston, Haier, Voltas Beko,
Washing machines
Croma, Koryo, T- series, Micromax, Lloyd, Intex
Mobile Motorola, Samsung, Nokia, Gionee, Karbonn, Tambo , Intex
Set top boxes Hathway, Den & Dish TV
Hearables & wearables boAt
IT hardware Lenovo, Acer
Telecom Bharti Airtel
Security systems CP Plus, Dahua and Panasonic


Exhibit 19: DIXON - recent financial performance (consolidated)
Total Income 29,528 28,551 38,668 24,047 30,655 4 27 1,21,920 1,06,971 14
Raw material costs 26,823 25,953 35,346 21,391 27,519 3 29 1,10,208 97,792 13
Employee costs 537 547 702 637 630 17 (1) 2,517 1,978 27
Other expenses 986 1,050 1,168 908 943 (4) 4 4,069 3,409 19
EBITDA 1,182 1,001 1,452 1,112 1,563 32 41 5,127 3,791 35
Depreciation 191 241 291 290 325 70 12 1,146 840 37
Finance costs 139 144 158 152 151 9 (0) 606 442 37
Other income 18 4 6 28 18 - (35) 56 38 47
PBT 869 621 1,008 698 1,105 27 58 3,431 2,548 35
Tax 238 165 231 186 315 32 69 897 644 39
PAT 631 454 771 519 806 28 55 2,551 1,903 34
EPS (Rs) 10.6 7.7 13.0 8.7 13.5 27 55 43.0 32.5 32
Gross margin 9.2 9.1 8.6 11.0 10.2 107 (82) 9.6 8.6 103
Employee costs 1.8 1.9 1.8 2.6 2.1 24 (59) 2.1 1.8 22
Other expenses 3.3 3.7 3.0 3.8 3.1 (26) (70) 3.3 3.2 15
EBITDA margin 4.0 3.5 3.8 4.6 5.1 110 48 4.2 3.5 66
Depreciation 0.6 0.8 0.8 1.2 1.1 41 (15) 0.9 0.8 16
EBIT margin 3.4 2.7 3.0 3.4 4.0 68 62 3.3 2.8 51
Finance costs 0.5 0.5 0.4 0.6 0.5 2 (14) 0.5 0.4 8
Other income 0.1 0.0 0.0 0.1 0.1 (0) (6) 0.0 0.0 1
PBT 2.9 2.2 2.6 2.9 3.6 66 70 2.8 2.4 43
Effective tax rate 27.3 26.7 22.9 26.6 28.5 115 184 26.1 25.3 86
PAT 2.1 1.6 2.0 2.1 2.6 44 45 2.1 1.8 30
Consumer Electronics 10,104 9,322 15,007 8,640 9,810 (3) 14 42,779 51,695 (17)
Lighting 3,046 2,312 2,904 2,630 2,700 (11) 3 10,546 12,841 (18)
Home Appliances 2,341 2,556 3,629 2,440 2,810 20 15 11,435 7,088 61
Mobile & EMS 12,941 13,049 15,944 9,150 14,100 9 54 52,243 31,383 66
Security Systems 1,096 1,311 1,183 1,184 1,240 13 5 4,918 3,964 24
Segment EBITDA (%) YoY (bps) QoQ (bps) YoY (bps)
Consumer Electronics 2.8 2.7 2.9 3.0 3.8 96 76 3.1 2.4 64
Lighting 7.1 7.2 8.2 9.1 9.6 250 54 8.6 6.9 171
Home Appliances 7.9 8.1 9.0 10.2 11.0 311 79 9.6 7.6 193
Mobile & EMS 3.5 2.5 2.7 3.6 4.2 65 58 3.2 3.1 10
Security Systems 3.4 4.0 3.0 2.0 2.9 (55) 88 3.0 3.8 (82)

Volumes across divisions: FY23 and outlook
• TVs: sold 3.4mn in FY23 (up ~15% YoY), and aims to sell 3.8mn units in FY24.
• LED bulbs, batten, downlighters: 170mn for FY23.
• Semi-automatic washing machines: 1.5m (+29% YoY) and targets 1.75mn in FY24.
• Fully automatic top load: 0.16mn units in FY23 to rise to 0.25mn in FY24.
• Smart phones (ex-Samsung): 3.54mn (up 40% YoY); Feature phones: 5.5mn (up
82% YoY); Samsung to shut down its feature phones business.
• FY24 growth is likely to be robust. Margins expected to improve to ~4.5% on
superior product mix, operating leverage, cost optimisation and price hikes in
ODM.
• FY24 capex guidance: Rs 4 bn (largely in refrigeration and mobiles).
• Consumer Electronics
o Despite 13%/15% volume growth in 4Q/FY23, respectively, revenue fell due to
huge price correction in the international markets.
o ODM sublicensing rights with Google (Android, Google TV) opened a lot of
opportunities.
o Tied up with Samsung for Tizen operating system to offer combined solutions.
o Rising mix of high-margin ODM business (5% to 38% in last few years, and
expected to touch 45-50% in FY24) could drive EBITDA margin to 3.5-4.5%.
o Backwardly integrated wires for LED TV from 2HFY23.
• Lighting products: aims 12-15% growth in FY24 aided by new product launches.
o FY23 revenue was impacted due to reduction in commodity prices and freight,
and migration of LED bulb tech to driver-on-board technology (25% lower
prices). Domestic market was flattish on high competitive intensity.
o Received export orders from the UAE and first order from Germany; In
advanced discussions with customers in the US and UK.
o Incurred capex under the PLI scheme; benefits to flow in FY24 onwards.
• Home appliances: aims for 20% volume growth in FY24.
• Mobile Phones and EMS division: aims FY24 revenue to grow at 15% to Rs 60bn.
o Large orders from Jio, for which manufacturing has started (0.5mn units per
month order); Nokia has increased the quantity.
o Close to finalising 2 of the largest global brands in India (Rs 40-50bn revenue
potential in FY24).
o Incentives are booked under PLI.
o Margins in businesses (ex. Mobile) at >4.5%.
• Security systems: expanded capacity from 10mn units to 14mn units p.a.
• Telecom: bagged a large order from Airtel; healthy order book.
DIXON TECHNOLOGIES (FINANCIALS)

Net revenues 64,482 1,06,971 1,21,920 1,52,667 1,85,858 Share capital 117 119 119 119 119
Growth (%) 46.5 65.9 14.0 25.2 21.7 Net worth 7,373 9,968 12,849 16,580 21,329
Direct costs 57,697 97,792 1,10,208 1,37,847 1,67,817 Total debt 1,561 4,580 1,826 1,926 2,026
Gross Margin (%) 10.5 8.6 9.6 9.7 9.7 Minority interest - 6 (3) (3) (3)
SG&A 3,919 5,387 6,585 8,139 9,741 DT Liability/(Asset) 184 201 224 251 278
EBITDA 2,866 3,791 5,127 6,680 8,300 Capital Employed 9,118 14,754 14,897 18,754 23,631
- Depreciation 437 840 1,146 1,396 1,668 Net Intangible assets 122 494 528 528 528
Interest Exp 274 442 606 193 203 CWIP 724 220 1,197 1,207 1,217
PBT 2,170 2,548 3,432 5,167 6,615 Investments (Strategic) - - - - -
Effective tax rate (%) 26.4 25.3 26.1 25.5 25.5 Investments (Financial) 953 1,410 442 1,942 5,442
+ Associates/(Minorities) 1 2 3 3 3 Current Assets 20,589 29,282 30,428 37,359 44,827
Net Income 1,598 1,903 2,551 3,850 4,928 Cash 689 1,823 2,292 2,297 2,548
Adjusted income 1,598 1,903 2,551 3,850 4,928 Current Liabilities 19,339 28,017 31,898 39,091 46,776
WANS 59 59 60 60 60 Working capital 1,250 1,265 (1,470) (1,732) (1,949)
FDEPS (Rs/share) 27.3 32.1 42.8 64.6 82.8 Capital Deployed 9,118 14,754 14,897 18,754 23,631
FDEPS growth (%) 31.0 17.5 33.6 50.9 28.0 Contingent Liabilities 23 103 -

EBIT (incl. other income) 2,556 3,069 4,167 5,284 6,632 P/E (x) 158.3 134.7 100.9 66.8 52.2
Non-cash items 437 840 1,146 1,396 1,668 EV/EBITDA (x) 88.2 68.0 50.0 38.2 30.3
Incr./(decr.) in WC 743 641 (2,764) (242) (197) P/B (x) 34.3 25.7 20.0 15.5 12.1
Others including taxes 549 540 820 1,271 1,640 RoE (%) 21.7 19.1 19.9 23.2 23.1
Operating cash-flow 1,701 2,728 7,258 5,651 6,857 RoCE (%) 31.5 25.0 27.2 31.9 32.2
Capex 1,680 4,174 4,502 4,010 3,010 ROIC 35.3 27.9 31.6 36.9 36.3
Free cash-flow 22 (1,446) 2,755 1,641 3,847 DPS (Rs per share) 1.0 2.0 - 2.0 3.0
Acquisitions Dividend yield (%) 0.0 0.0 - 0.0 0.1
Dividend - 59 119 119 179 Dividend payout (%) 3.7 6.2 - 3.1 3.6
Equity raised 269 642 336 - - Net debt/equity (x) 0.1 0.3 (0.0) (0.0) (0.0)
Debt raised 688 3,026 (2,776) 100 100 Receivables (days) 62 46 51 51 51
Fin Investments 983 483 (926) 1,500 3,500 Inventory (days) 42 39 29 29 29
Misc. Items (CFI + CFF) 314 554 717 116 17 Payables (days) 97 79 73 73 73
Net cash-flow (318) 1,126 406 5 251 CFO:PAT% 106 143 285 147 139
Systematix
Elin Electronics 12 July 2023
A leading contract manufacturer for ECD products

INITIATING COVERAGE We initiate coverage on Elin Electronics (ELIN) with a BUY rating and a target price
Sector: EMS Rating: BUY of Rs 197, based on 15x FY25E EPS of Rs 13. FY23 was muted (revenue/EBITDA/PAT
down 2%/18%/32% YoY), impacted by delays in product launches and downtrading
in small appliances. Management expects low-to-mid-teen revenue growth, with
Stock Info EBITDA margin of 7-7.5% in FY24, led by fans (flat in FY23) on new launches
Sensex/Nifty 65,618/19,439 (TPW/BLDC fans). Lower realisation will likely restrict Lighting revenue. In small
Bloomberg ELIN IN appliances, mixer grinder capacity for entry and mid-range products is expected to
Equity shares (mn) 47.9 be operational by Sep 2023. Robust growth momentum in Personal Care segment
52-wk High/Low 232/118 should sustain, led by trimmers, heated hair-brush and sterilizers. Backward
Face value Rs 5 integration through PLI scheme for LED lighting could drive margins. Thus, post
M-Cap Rs 7.6bn/ USD 92mn 11%/6%/-1% CAGR in revenue/EBITDA/PAT over FY20-23, we estimate 15%/29%/
53% CAGR over FY23-25E. RoIC too should expand 580bps to ~17% in FY25E.
Financial Snapshot (Rs mn) Company profile: ELIN is India’s leading fractional horsepower motor manufacturer
and an EMS company for lighting, fans, and small/ kitchen appliances. It serves under
Net sales 10,755 12,368 14,223
both OEM and ODM business models, and has an R&D facility at Ghaziabad. 3 of its
EBITDA 652 898 1,090
OPM % 6.1 7.3 7.7
manufacturing facilities are strategically located in Ghaziabad (Uttar Pradesh), Baddi
PAT (adj.) 269 495 628 (Himachal Pradesh) and Verna (Goa). Its top 5 customers are Signify, Versuni, Philips
EPS (adj.) (Rs) 5.6 10.3 13.1 India, Havells, and IFB; Top 10 customers account for ~75% of its revenue share.
PE (x) 28.2 15.3 12.1 Revenue mix across verticals (FY23): LED lighting, fans and switches (33%), Small
P/B (x) 1.5 1.4 1.3 appliances (23%), Fractional horsepower (FHP) motors (18%), Other EMS (9%),
EV/EBITDA (x) 10.9 7.9 6.4 Medical Diagnostics Cartridges (1%), and Precision Components & Others (21%).
RoE (%) 5.5 9.2 10.5
RoCE (%) 9.8 12.2 13.9 Key customers: LED lighting, fans and switches (Signify, Eveready); Small appliances
Net-D/E (x) (0.1) (0.1) (0.1) (Philips, Bosch, Faber, Panasonic, Usha); FHP motors (Havells, Bosch, Faber,
Panasonic, Preethi, Maharaja brand, Usha); Medical diagnostic cartridges (Molbio);
Moulded and sheet metal parts and components (Denso, IFB)
Mar'23 Dec'22
Promoter 33.0 32.9 Financial highlights: ELIN reported muted FY23 performance, with consolidated
- Pledged revenue/EBITDA/PAT falling 2%/18%/32% YoY to Rs 10.7bn, Rs 0.7bn and Rs 0.3bn,
FII 2.8 6.2 respectively. EBITDA and PAT margins contracted 117bps and 109bps YoY to 6.1%
DII 18.8 13.2 and 2.5%. Delays in product launches (TPW and BLDC fans) impacted the fans
Others 45.5 47.7 division, while ELIN’s focus on premium segment impacted its performance in small
Stock Performance (1-year) appliances as consumers downgraded to affordable products amid weak sentiments.
288 It clocked low RoE (~13%) and RoCE (~15%) during FY20-22.
241 Management guidance: For FY24, management expects low-to-mid-teen revenue
194
growth, with EBITDA margin of 7-7.5%. Lighting revenue (ex-flashlights up ~8% YoY in
FY23) is expected to expand at a moderate pace. Strong growth is expected in fans
147
(flat in FY23), primarily due to new product launches (TPW fans and BLDC fans). In
100 small appliances, mixer grinder capacity expansion in Ghaziabad for entry and mid-
Jul-23
Apr-23
Jan-23
Dec-22
Mar-23
Feb-23
May-23
Jun-23
range products is expected to be operational by Sep 2023. Robust traction in

Personal Care should sustain, led by trimmers, heated hair-brush and sterilizers.
ELIN Sensex
Outlook and View: Post 11%/6%/-1% CAGR in revenue/EBITDA /PAT over FY20-23,
we estimate 15%/29%/53% CAGR over FY23-25E, with EBITDA margin expanding
160bps to 7.7%. RoIC too is expected to expand 580bps to ~17% in FY25E. With a
positive outlook, we initiate coverage on ELIN with a BUY rating and a target price of
Rs 197, based on 15x FY25E EPS of Rs 13.
12 July 2023 Elin Electronics
Story in charts
Exhibit 1: Segment-wise revenue mix
FY19 FY20 FY21 FY22 FY23 FY24E FY25E
Total revenue (Rs mn) 8,283 7,856 8,624 10,936 10,755 12,368 14,223
Revenue mix (%)
Lighting, Fans and Switches 38 37 30 30 33 33 33
Small Appliances 28 25 22 23 23 23 23
FHP Motor 12 15 21 22 18 18 18
Other EMS 2 4 3 3 3 3 3
Total EMS 80 81 77 78 78 78 78
Total Non-EMS 20 19 23 22 22 22 22
Source: Company
(Rs bn) (%) (%)
16 14.2
FY20-23 CAGR: 11% 35 29.5 10
12.4 27.6 25.9 26.9 27.1
FY23-25E CAGR: 15% 25.4
12 10.9 10.8 26 8
8.6 7.7 7.2 7.3 7.7
7.9 18 7.1 5
8 6.1
9 4.0 4.0 4.4 3
3.5 3.6
4 2.5
0 0
0
Gross margin EBITDA margin (RHS) PAT margin (RHS)
Exhibit 4: PAT growth trend Exhibit 5: NWC cycle trend

(Rs mn) (%) (Days)
FY20-23 CAGR: -1%
82
800 5 90
77
FY23-25E CAGR: 53%

67
67
66
66
67
66
66
59
600 4.4 4 68
49
48
4.0 4.0
43
43
44
42
42
43
42
42
40
3.6
37
400 3.5 3 45
33
32
2.5
200 1 23
275 348 391 269 495 628
0 0 0

(%) (x)
30 0.5 0.4
0.3
23 17 18 17 17 0.3 0.2
15
15 11
0.0 (0.1) (0.1)
8 12 13 13
9 11 (0.1)
(0.3)
0 5
FY20 FY21 FY22 FY23 FY24E FY25E (0.5)
RoE RoIC FY20 FY21 FY22 FY23 FY24E FY25E
Leader in Small Appliances, FHP motors and domestic LED Lighting; high client concentration
Exhibit 8: ELIN – Key product segments and market positioning
Source: Company
Exhibit 9: ELIN - Revenue breakdown (Rs mn)

FY19 FY20 FY21 FY22 FY23
Lighting, Fans and Switches 3,161 2,928 2,558 3,325 3,551
Lighting 2,674 2,418 1,870 2,352 2,529
Flashlights 361 352 346 310 329
Fans 6 12 213 517 528
Switches 120 146 129 146 165
Small Appliances 2,296 1,939 1,934 2,551 2,505
Kitchen & Home Care 1,786 1,520 1,635 1,972 1,781
Personal Care 510 419 299 579 724
FHP Motor 1,021 1,191 1,844 2,369 1,952
Consumer Durables 1,696 1,396
Fans 530 349
Others 143 207
Other EMS 177 301 296 309 373
Total EMS 6,655 6,359 6,632 8,554 8,381
Precision Components & Others 1,628 1,455 1,571 2,215 2,253
Medical Cartridges - 42 421 167 121
Total Non-EMS 1,628 1,497 1,992 2,382 2,374
Total Revenue 8,283 7,856 8,624 10,936 10,755
Exhibit 10: ELIN - Revenue mix (%)
FY19 FY20 FY21 FY22 FY23
Lighting, Fans and Switches 38 37 30 30 33
Lighting 32 31 22 22 24
Flashlights 4 4 4 3 3
Fans 0 0 2 5 5
Switches 1 2 2 1 2
Small Appliances 28 25 22 23 23
Kitchen & Home Care 22 19 19 18 17
Personal Care 6 5 3 5 7
FHP Motor 12 15 21 22 18
Consumer Durables - - - 16 13
Fans - - - 5 3
Others - - - 1 2
Other EMS 2 4 3 3 3
Total EMS 80 81 77 78 78
Precision Components & Others 20 19 18 20 21
Medical Cartridges - 1 5 2 1
Total Non-EMS 20 19 23 22 22
Exhibit 11: ELIN – Customer concentration

Largest customer 2,600 2,236 2,954 1,624
% of revenue 33 26 27 27
Top-5 5,423 5,427 6,912 3,955
% of revenue 69 63 63 65
Top-10 6,348 6,718 8,437 4,898
% of revenue 81 78 77 81
New product launch and capex plans

Exhibit 12: Status of new product launches
Description Category Current Status
BLDC Fans Lighting, Fans & Switches Launched in Q1FY24, 1 more customer to be added in Q2FY24
TPW Fans Lighting, Fans & Switches Product ready, launch in Q1FY24
Heated Hair-Brush Small Appliances Product under development, launch in Q2FY24
Electric Sterilizer Small Appliances Product under development, launch in Q2FY24
Trimmer 3000 Small Appliances Product under development, launch in FY25
Oil Filled Radiator Small Appliances Product under development, launch in Q2FY24
Chimney Small Appliances Product under development, launch in FY25
OTG Small Appliances Product under development, launch in Q4FY24
BLDC MG Motor FHP Motors Product under development, launch in Q2FY24
AC ODU Motor FHP Motors Product ready, launch in Q3FY24
Source: Company
Exhibit 13: Capex overview

Amounts (Rs mn) Ghaziabad Baddi Goa Total (FY23)
Land & Building 75 23 - 98
Plant & Machinery 151 50 18 219
Electrical Installation 70 3 0 74
Tools, Dies & Moulds 58 27 13 98
Others 28 2 4 35
Total 383 105 36 524
Source: Company
• Land & Building: would create additional space of ~45,000 sq.ft. at the company’s
Ghaziabad facility, and are expected to be completed by FY24 end.
• Plant & Machinery: new SMT lines (primarily for connected lighting), moulding
machines, motor assembly lines, new product-related machineries (trimmers,
heated hair-brush, AC ODU motor etc) are to be added.
• Electrical Installation: erecting a 33 kVA line at its Ghaziabad facility at a cost of
Rs 34 mn and PNG genset of Rs 23 mn - both are one-time capex.
• Tools, Dies & Moulds: represent tooling development for new products, viz.,
trimmers, AC ODU motors, TPW fans & LED lighting – most of these tooling
investments should generate revenues in FY24.
Exhibit 14: Key initiatives undertaken/to be taken
Description Status
• Has gone live from Jan 1, 2023
Introduction of SAP
• Expects to drive efficiencies in inventory reduction and manpower planning through real-time data availability
• Reduction in per unit electricity cost, resulting in savings of Rs 3 lakh per month
Installation of 33 KVA line at
• Since there is no load shedding, genset usage would reduce, resulting in savings of Rs 3 lakh per month in diesel
the Ghaziabad factory
• Uninterrupted power supply helps in higher throughput of plant & machinery
• Hired a process consultant for the Ghaziabad factory, with the aim to deliver ~3% savings in labour cost by Q4FY24
Streamlining labour cost
via streamlining processes to reduce headcount and achieve some degree of automation
ODM revenue growth • Hired an ODM design & development head; design work on ODM models for Small Appliances has begun
Hiring key people • Hiring of a sales & marketing head in process
Source: Company

Exhibit 15: ELIN - recent financial performance (consolidated)
Total Income 3,170 2,941 3,103 2,023 2,687 (15) 33 10,754 10,938 (2)
Raw material costs 2,367 2,247 2,266 1,445 2,009 (15) 39 7,967 8,157 (2)
Employee costs 341 351 320 276 342 0 24 1,288 1,252 3
EBITDA 251 117 313 132 88 (65) (33) 651 790 (18)
Depreciation 38 43 41 44 59 56 33 186 144 30
Finance costs 38 33 41 31 25 (32) (18) 131 127 3
Other income 1 2 1 1 18 1,231 1,212 23 9 148
PBT 178 44 232 58 23 (87) (61) 357 529 (32)
Tax 49 10 60 13 7 (86) (47) 89 137 (35)
PAT (after JV/associate) 129 34 172 46 16 (88) (65) 268 392 (32)
EPS (Rs) 3.2 0.8 4.2 1.0 0.3 (89) (65) 5.6 9.6 (42)
Gross margin 25.3 23.6 27.0 28.5 28.0 266 (54) 25.9 25.4 49
Emp cost 10.8 11.9 10.3 13.6 12.7 195 (93) 12.0 11.5 53
EBITDA margin 7.9 4.0 10.1 6.5 3.3 (464) (323) 6.1 7.2 (117)
Dep 1.2 1.5 1.3 2.2 2.2 99 1 1.7 1.3 42
Interest 1.2 1.1 1.3 1.5 0.9 (24) (59) 1.2 1.2 5
Other income 0.0 0.1 0.0 0.1 0.7 64 61 0.2 0.1 13
Effective tax rate 27.4 21.9 25.9 21.7 25.0 (243) 325 24.9 25.9 (97)
PAT margin 4.1 1.2 5.5 2.3 0.6 (347) (166) 2.5 3.6 (109)
Lighting, Fans and
973 1,015 873 753 909 (7) 21 3,550 3,326 7
Switches
Small Appliances 834 619 872 314 700 (16) 123 2,505 2,551 (2)
FHP Motor 645 602 535 352 464 (28) 32 1,953 2,369 (18)
Other EMS 108 101 78 75 119 10 59 373 309 21
Medical Diagnostics
20 8 72 41 - (100) (100) 121 167 (28)
Cartridges
Precision Comp. &
590 596 673 488 496 (16) 2 2,253 2,215 2
Others
KTAs from management Interview and earnings concall

FY24 guidance
• Low double-digit growth with ~7.5% EBITDA margin.
• Demand for fans (flat in FY23) should return, as excess channel inventory has
been mostly liquidated.
• New product launches (TPW, BLDC) to drive strong growth for ELIN.
• To set up mixer-grinder capacity to service the mid-economy segment.
• Participating in the PLI scheme for LED lighting.
FY23 performance
• Revenue down 2% YoY, adj. EBITDA margin 7%, PAT down 32% YoY, 2.5% margin.
• Q4FY23 was a weak quarter as revenue fell 15% YoY; EBITDA margin contracted
~400bps to 3.3%; certain one-offs and non-recurring charges too had a bearing on
margins.
• New product launches (TPW fans and BLDC fans) were delayed from Q4FY23 to
Q1FY24.
• ELIN’s focus on the premium segment impacted its performance in small
appliances, as consumers downgraded to more affordable products amid weak
sentiment.
• Capex: Rs 524mn.
New products
• Targeting Havells, Crompton, Bajaj, Usha, and Philips for oil filled radiator (OFR)
heaters; Bajaj and Philips for ovens.
• Venturing into the AC market, with suppliers of ODU motor expected in Q2FY24.
• Sale of chimney motors could increase once customs duty is raised from 7.5% to
15% in the forthcoming budget.
• Exploring export opportunities for low-cost downlights and panels to Signify in
Europe and the US.
Key strategic initiatives

• Introduction of SAP.
• Installation of a 33 KVA line at the Ghaziabad facility.
• Hiring a process consultant.
• Hiring sales and marketing personnel to drive overall revenue growth.
ELIN ELECTRONICS (FINANCIALS)

Growth (%) 10 27 (2) 15 15 Net worth 2,623 3,031 4,931 5,378 5,959
Direct costs 6,247 8,157 7,967 9,039 10,366 Total debt 1,140 1,025 784 714 644
Gross Margin (%) 27.6 25.4 25.9 26.9 27.1 Minority interest - - - - -
EBITDA 665 790 652 898 1,090 Capital Employed 3,840 4,149 5,818 6,205 6,726
Interest Exp 97 127 131 74 64 CWIP 1 0 1 1 1
PBT 475 529 358 659 836 Investments (Strategic) - - - - -
Effective tax rate (%) 26.6 26.0 24.9 24.9 24.9 Investments (Financial) 136 12 265 465 665
+ Associates/(Minorities) - - - - - Current Assets 3,280 3,385 3,755 4,306 4,930
Net Income 348 391 269 495 628 Cash 54 49 997 718 561
Adjusted income 348 391 269 495 628 Current Liabilities 1,243 1,178 1,524 1,745 1,995
FDEPS growth (%) 26.7 12.4 (31.4) 84.3 26.9 Contingent Liabilities 74 89 89 - -

EBIT (incl. other income) 76 118 109 684 843 P/E (x) 21.7 19.3 28.2 15.3 12.1
OCF before WC changes 194 261 295 898 1,090 EV/sales (x) 1.0 0.8 0.7 0.6 0.5
- Incr./(decr.) in WC 936 130 (66) 330 374 P/B (x) 0.8 2.1 1.5 1.4 1.3
Others including taxes (406) (381) (263) 155 199 RoE (%) 13.3 12.9 5.5 9.2 10.5
Operating cash-flow (336) 513 623 413 517 RoCE (%) 16.6 16.4 9.8 12.2 13.9
- Capex 197 424 513 350 350 ROIC 18.0 16.9 11.3 15.3 17.1
Free cash-flow (533) 89 111 63 167 DPS (Rs per share) - 1.0 1.0 1.0 1.0
Acquisitions Dividend yield (%) - 0.6 0.6 0.6 0.6
- Dividend - - - 48 48 Dividend payout (%) - 12.2 17.8 9.7 7.6
+ Equity raised - 136 35 - - Net debt/equity (x) 0.4 0.3 (0.1) (0.1) (0.1)
+ Debt raised 602 (114) (130) (70) (70) Receivables (days) 77 59 67 67 67
- Fin Investments (136) (130) 248 200 200 Inventory (days) 49 40 42 42 42
- Misc. Items (CFI + CFF) 248 247 (196) 24 6 Payables (days) 44 33 43 43 43
Net cash-flow (44) (7) (36) (279) (157) CFO:PAT% (97) 131 232 83 82
Systematix
IKIO Lighting 12 July 2023
Focus on premium LED lighting and backward integration

COMPANY UPDATE Company profile: IKIO Lighting (IKIO) is an integrated player for LED lighting solutions
Sector: EMS Rating: Not Rated and was incorporated in 1999. Though intense focus on the ODM business (93%),
premium decorative lighting products and backward integration the company
CMP: Rs 415 Target Price: NA
recorded robust EBITDA margin (~22%) and RoCE (~40%). Its business segments
Stock Info include LED lighting (86% mix); refrigeration lights (3%); ABS (acrylonitrile butadiene
Sensex/Nifty 65,618/19,439 styrene) piping (3%) and other products (8%). Signify, its key customer, contributed
Bloomberg IKIO IN 51% to 9MFY23 revenue on proforma basis. The number of SKUs manufactured for
Equity shares (mn) 65.0 Signify increased from 225 in FY18 to 753 in 9MFY23. Other key customers are
52-wk High/Low 463/404 Western Refrigeration, Panasonic Life Solutions and Novateur Electrical. It is also
Face value Rs 10 exploring export opportunities in LED lighting/RV segments through new client
EM-Cap Rs 27bn/ USD 329mn additions. It has 4 manufacturing plants (1 in Haridwar and 3 in Noida).
Revenue mix across verticals (9MFY23 proforma): LED lighting (86%), Refrigeration
Financial Snapshot (Rs mn) - proforma
lighting (3%), ABS piping (3%) and Other products (8%).
Y/E Mar FY21 FY22 FY23E
Net sales 2,134 3,318 4,382 Revenue mix across geography (9MFY23 proforma): India (85%), Overseas (15%)
EBITDA 478 773 979
OPM % 22.4 23.3 22.3 Financial highlights: On proforma basis, 9MFY23 consolidated revenue, EBITDA, PAT
PAT (adj.) 288 505 685 stood at Rs 3.3bn, Rs 734mn and 513mn, respectively, with annualised numbers at Rs
EPS (adj.) (Rs) 11.5 20.2 10.5 4.4bn, Rs 979mn and Rs 685mn, respectively, generating 22.3% EBITDA margin.
PE (x) 36.0 20.5 39.4 RoE/RoCE are likely to be strong at ~40%.
P/B (x) 0.0 9.5 17.0
Management guidance: Management aims for healthy growth momentum, and
EV/EBITDA (x) 58.0 36.3 28.8
RoE (%) 45.8 46.4 43.1 expects EBITDA margin to sustain at 22%+ levels. Faster growth in other verticals
RoCE (%) 37.9 40.8 37.1 should reduce its dependence on Signify revenues (to 33% in the coming years from
Net-D/E (x) 1.2 1.0 0.8 51% in 9MFY23). There is scope the company may reduce its inventory (surged
during COVID-19 pandemic) and debtor days (to 75 from 90+ currently).
Management expects to use the IPO proceeds (Rs 2.35bn) to incur capex at its Noida
Jun'23
facility and aims for ~5x asset turnover at 75% capacity utilisation.
Promoter 72.5
- Pledged Valuation: The stock trades at 39x FY23E proforma EPS of Rs 11.
FII 5.2
DII 6.8 Exhibit 1: IKIO – Proforma financial performance
Others 15.6 Particulars FY20 FY21 FY22 FY23E
Stock Performance (1-year) Total revenue (Rs bn) 2.2 2.1 3.3 4.4
480 Revenue Mix (%)
455 LED lighting 85.2 87.3 86.8 86.0
430
Others (Ref lights, ABS pipes) 14.8 12.7 13.2 14.0
405
Exports revenue mix (%) 4.1 4.1 10.6 15.0
380
EBITDA margin (%) 16.9 22.4 23.3 22.3
04-Jul-23
01-Jul-23
07-Jul-23
16-Jun-23
19-Jun-23
22-Jun-23
25-Jun-23
28-Jun-23
PAT margin (%) 9.7 13.5 15.2 15.6
IKIO Sensex RoIC (%) 41.6 40.0 41.5 38.8

12 July 2023 IKIO Lighting
Story in charts
(Rs mn) (%) (%)
50 23.3 25
5.0 22.4 22.3
FY20-23E CAGR: 26% 4.4
36.8
38 43.6 42.1 19
3.8 3.3 38.5
16.9
25 15.2 15.6 13
2.5 2.2 2.1 13.5
13 9.7 6
1.3
0 0
FY20 FY21 FY22 FY23E
0.0
FY20 FY21 FY22 FY23E Gross margin EBITDA margin (RHS) PAT margin (RHS)

(Rs mn) (%) (Days)
750 18
157
FY20-23E CAGR: 47% 15.6 180
15.2
140
13.5
121
115
563 14 135
104
99
9.7
375 9 90
62
61
61
57
56
54
49
40
26
26
188 5 45
214 288 505 685

0
0 0
PAT PAT margin (RHS) FY20 FY21 FY22 FY23E

(%) (x)
60 2.0
48 42 41 1.3
40 39 1.5
1.2
1.0
35 41
38 38 37 1.0 0.8
23
0.5
10
0.0
ROE ROIC FY20 FY21 FY22 FY23E
High product and customer concentration

Exhibit 8: IKIO - Corporate structure
IKIO Lighting
Holding Company Limited
Fine Technologies (India) IKIO Solutions Private

Private Limited Limited
Subsidiary
(Incorporated on (Incorporated on
February 2, 1999) September 20, 2018)
Royalux Exports Private Royalux Lighting Private

Limited Limited
Step Down Subsidiary
(Incorporated on (Incorporated on
December 7, 2021) March 23, 2022)
Exhibit 9: Key milestones

Year Particulars
2016 Incorporated as ‘IKIO Lighting Private Limited’ under the Companies Act, 2013
2016 Commenced manufacturing of refrigerator lights
2019 Commenced a new business in Noida Special Economic Zone for 100 % export activity
2022 Converted into a public limited company
2022 Acquired 100% equity shares of IKIO Solutions Private Limited and Fine Technologies (India) Pvt Ltd
Source: Company
Exhibit 10: Revenue Mix (%)

100% 4 2 3
6 4 3
9 9 8 8
75%
50%
85 87 87 86
25%
0%
LED lighting Other products Refrigeration lights ABS piping
Exhibit 11: IKIO – Customer concentration

Signify - Largest customer 1,345 1,510 2,006 1,686
% of proforma revenue 61 71 60 51
Top-5 1,608 1,778 2,426 2,575
Top-10 1,757 1,873 2,659 2,575
Top-20 1,885 1,949 2,821 2,817
Focus on premium product offerings

Exhibit 12: LED lighting – focus on premium product offerings
ABS piping: Commenced business in FY22; key customers include, RLux RV LLC and Znergy Inc., who supply to Forest River Inc. (a
subsidiary of Berkshire Hathaway)
Refrigerator LED lighting: Commenced business in FY16; key customers include, Voltas, Frigoglass India and Western refrigeration
Other products: Manufactures and assembles fan regulators, switch products, light strips, mouldings and fittings, etc.
KTAs from management Interviews

• Expects healthy growth and sustainable 22%+ margin.
• Focus on ODM business and backward integration to aid margins.
• Concentration risk to reduce, as Signify revenue mix could decline further to 33%
in the near future, from 51% in 9MFY23 (62% in FY22), as other verticals grow at a
faster pace.
• Scope to reduce inventory (surged during COVID) and debtor days (to 75 from 90+
currently).
• Expects to maintain asset turnover at 5-6x on new capex at 75% capacity
utilisation.
• Will continue to focus only on B2B business.
~Rs 2.5bn of IPO proceeds to be used in capex

• Will expand capacities at its Noida facility through a subsidiary.
• New facility will be majorly for Phillips products, and some of it for other
products.
• Current plant utilisation at 60-75% across different verticals.
• R&D spend at < 1% of total revenue.
Lighting solution
• Focus on high-end and decorative lighting space, and not just bulbs and battens.
• Giving LED solutions to retail stores since 2014.
Commercial refrigeration and ABS pipes

• Commercial refrigeration and lighting solutions fall under Royalux subsidiary.
• Majorly exported via a subsidiary, Royalux.
• Exports grew even during the COVID period.
• Supplies ABS pipes to customers in the US.
• Takes 1.5-2 years from idea generation to reach markets due to various
certifications, field runs, etc.
IKIO LIGHTING (PROFORMA FINANCIALS)

YE: Mar (Rs mn) FY20 FY21 FY22 FY23E YE: Mar (Rs mn) FY20 FY21 FY22 FY23E
Net revenues 2,202 2,134 3,318 4,382 Share capital 1 1 250 650
Growth (%) - (3) 55 32 Net worth 359 629 1,089 1,588
Direct costs 1,392 1,204 1,922 2,696 Total debt 562 786 1,152 1,440
Gross Margin (%) 36.8 43.6 42.1 38.5 Minority interest - - - -
SG&A 437 452 623 707 DT Liability/(Asset) (0) (2) (2) (1)
EBITDA 373 478 773 979 Capital Employed 920 1,412 2,238 3,028
EBITDA margins (%) 16.9 22.4 23.3 22.3 Net tangible assets 540 585 604 643
- Depreciation 41 47 51 57 Net Intangible assets 1 1 1 0
Other income 16 11 22 56 Goodwill - - - 147
Interest Exp 46 44 49 62 CWIP 5 41 94 215
PBT 302 399 695 915 Investments (Strategic) - - - -
Effective tax rate (%) 29.1 27.8 27.3 25.2 Investments (Financial) - - - -
+ Associates/(Minorities) - - - - Current Assets 820 1,080 1,921 2,323
Net Income 214 288 505 685 Cash 82 36 27 206
Adjusted income 214 288 505 685 Current Liabilities 528 330 408 507
WANS 0 0 25 65 Working capital 292 750 1,513 1,817
FDEPS (Rs) 9 12 20 11 Capital Deployed 920 1,412 2,238 3,028
FDEPS growth (%) 35 75 (48) Contingent Liabilities - 293 174 -

YE: Mar (Rs mn) FY20 FY21 FY22 FY23E YE: Mar FY20 FY21 FY22 FY23E
EBIT (incl. other income) 242 284 385 922 P/E (x) 48.5 36.0 20.5 39.4
+ Non-cash items 22 25 24 57 EV/EBITDA (x) 73.6 58.0 36.3 28.8
OCF before WC changes 264 308 410 979 EV/sales (x) 12.5 13.0 8.5 6.4
- Incr./(decr.) in WC 55 250 390 304 P/B (x) 0.1 0.0 9.5 17.0
Others including taxes 77 59 72 217 RoE (%) 59.6 45.8 46.4 43.1
Operating cash-flow 132 (0) (53) 458 RoCE (%) 37.8 37.9 40.8 37.1
- Capex 39 31 46 217 ROIC 41.5 40.0 41.5 38.8
Free cash-flow 93 (31) (98) 241 DPS (Rs per share) - - - -
Acquisitions Dividend yield (%) - - - -
- Dividend - - - - Dividend payout (%) - - - -
+ Equity raised 1 - 250 400 Net debt/equity (x) 1.3 1.2 1.0 0.8
+ Debt raised (25) (28) 109 288 Receivables (days) 49 56 61 61
- Fin Investments - - - 147 Inventory (days) 62 99 121 104
- Misc. Items (CFI + CFF) 21 5 256 604 Payables (days) 54 40 26 26
Net cash-flow 47 (64) 5 178 CFO:PAT% 62 (0) (10) 67
Systematix
Kaynes Technology 12 July 2023
Consistent strong financial performance

INITIATING COVERAGE We initiate coverage on Kaynes Technology (KAYNES) with a BUY rating, and a
Sector: EMS Rating: BUY target price of Rs 1,930, based on 60x FY25E EPS of Rs 32. Robust industry tailwinds
and KAYNES’ strong focus on the entire customer value chain has helped the
company in maintaining a superior business profile over peers. After posting strong
Stock Info FY23 numbers (revenue/ EBITDA/PAT up 59%/80%/128% YoY), management is
Sensex/Nifty 65,618/19,439 heading for 30-40% CAGR in revenue over next few years, based on order booking
Bloomberg KAYNES IN from customers. KAYNES’ Rs 26.5bn order book (2.4x FY23 revenue), Rs 2.2bn
Equity shares (mn) 58.1 capex in FY24 (to triple capacity) and ~5x asset-turnover provide robust outlook on
52-wk High/Low 1,616/679 growth for KAYNES. Likely lower NWC days (99 currently) should boost cash flows.
Face value Rs 10 Post 45%/60%/116% CAGR in revenue/EBITDA/PAT over FY20-23, we estimate
M-Cap Rs 97bn/ USD 1.2bn
32%/34%/40% CAGR over FY23-25E, with healthy 26% RoIC despite high capex.
Company profile: KAYNES is an end-to-end and IoT solutions-enabled integrated
Financial Snapshot (Rs mn)
electronics manufacturer in India, having capabilities across the entire spectrum of
ESDM services. The company has over three decades of experience in providing
Net sales 11,261 15,203 19,763
EBITDA 1,683 2,303 3,033
Conceptual Design, Process Engineering, Integrated Manufacturing and Life Cycle
OPM % 14.9 15.1 15.3 Support for its major customers. The company has 8 manufacturing facilities for high-
PAT (adj.) 952 1,440 1,870 value products with variable or flexible volumes. Exports contribute 15% to revenue
EPS (adj.) (Rs) 16.4 24.8 32.2 from 350+ customers in 26 countries, including marquee MNC names. It enjoys long
PE (x) 101.3 67.0 51.6 standing relationships (>10 years) with its top 10 customers across verticals.
P/B (x) 10.1 8.7 7.5 Revenue mix across verticals (FY23): Automotive (38%), Industrial (27%), Railways
EV/EBITDA (x) 55.3 41.1 31.3
(12%), Consumer (9%), Medical (6%), Internet of Things (IoT) and Information
RoE (%) 9.9 13.1 14.5
Technology (6%), Aerospace, Defence and other segments (2%).
RoCE (%) 21.1 17.9 20.0
Net-D/E (x) (0.3) (0.2) (0.1) Revenue mix across segments (FY23): OEM PCBA (62%), OEM Box Build (30%),
Product Engineering and IoT solutions (5%) and ODM (3%)
Mar'23 Dec'22 Financial highlights: Robust industry tailwinds and KAYNES’ strong focus on the
Promoter 63.6 63.6 entire customer value chain reflect its superior business profile over peers. FY23
- Pledged revenue/EBITDA/PAT grew 59%/80%/128% YoY to Rs 11.3bn/Rs 1.7bn/Rs 0.95bn,
FII 8.2 8.5 respectively. EBITDA and PAT margins expanded 168bps and 255bps YoY to 14.9%
DII 13.0 11.4 and 8.5% respectively. Shortage of chip components hurt growth to some extent. Net
Others 15.3 16.5 debt reduced by Rs 1bn to Rs 474mn during FY23, aided by IPO proceeds.
Stock Performance (1-year) Management guidance: Management aims for strong 30-40% revenue CAGR over
1,900
the next few years, based on order booking from its customers. Muted exports in
1,525 FY23 could revive and contribute 25-30% to revenue in 2-3 years, spurred by robust
1,150
traction in the medical and electronics sectors. Aerospace and defense vertical
revenues are expected to increase substantially in FY24; IT, Medical, Telecom are
775
emerging verticals for KAYNES. It has received approval for two PLIs (white goods
400 and telecom) and has applied for a PLI in IT products. Its Rs 26.5bn order book (2.4x
Jan-23
Nov-22
Apr-23
Jul-23
Feb-23
May-23
FY23 revenue), Rs 2.2bn capex in FY24 (to triple capacity) and ~5x asset turnover
provide robust outlook on growth, and we estimate RoE/RoCE of 20/25% for
KAYNES Sensex
KAYNES. Likely reduction in NWC days (99 currently) could boost cash flows.
we estimate 32%/34%/40% CAGR over FY23-25E, with healthy 26% RoIC despite high
capex. With a positive outlook, we initiate coverage on KAYNES with a BUY rating
and a target price of Rs 1,930, based on 60x FY25E EPS of Rs 32.
12 July 2023 Kaynes Technology
Story in charts
(Rs bn) (%) (%)
22 19.8 40 34 40
FY20-23 CAGR: 45% 32 31 31 31 31
FY23-25E CAGR: 32% 15.2 30 30
17
11.3 20 15 15 15 20
13
11 11 10
7.1
10 10
3.7 4.2 3 2
6 9 9
6 8
0 0
0

(Rs mn) (Days)
165
(%)
151
150
2,000 13 180
142
135
134
134
FY20-23 CAGR: 116% 9.5 9.5
117
114
114
8.5
109
108
10
106
FY23-25E CAGR: 40%
102
1,500 135
93
91
85
83
5.9 8
74
73
72
72
72
72
1,000 90
5
2.6 2.2
500 45
3
95 94 417 952 1,440 1,870
0 0 0

(%) (x)
50 3.0
38 32 1.4
26 27 26 1.8 1.0
25 0.8
25
12 0.5 (0.2) (0.1)
(0.3)
13 21
13 14 (0.8)
0 9 10
7
FY20 FY21 FY22 FY23 FY24E FY25E (2.0)
Exhibit 7: Revenue mix (segment-wise) Exhibit 8: Revenue mix (geography-wise)

5 3 3 2 2 2 100% 2 2
100% 4 8 3
6 5 6 6 6 7 6
11 11 10 6 6 6 9
6 8 9 9 9 7 11
75% 8 9 12 12 12 83% 8
14 10 9
17
50% 30 27 27 27
33 65%
32
25% 79 80 85
34 38 38 38 74
20 24 48%
0%
FY20 FY21 FY22 FY23 FY24E FY25E 30%
Automotive Industrial Railways
FY20 FY21 FY22 FY23
Consumer Medical IoT/ IT/ Others
Aerospace, Defence India Europe North America South East Asia Others
Diversified product portfolio across non-consumer verticals;

covers entire customer value chain
Exhibit 9: Segmental revenue mix (%)
Automotive 20 24 34 38 38 38
Industrial 32 33 30 27 27 27
Railways 17 14 10 12 12 12
Consumer 8 9 8 9 9 9
Medical 6 11 10 6 6 6
IoT / IT and Others 11 6 5 6 6 6
Aerospace, Defence,
5 3 3 2 2 2
Outer-space and Nuclear
TOTAL 100 100 100 100 100 100
Exhibit 10: Vertical-wise revenue mix (%)

FY20 FY21 FY22 FY23
OEM-PCBA 62 60 63 62
OEM- Box Build 26 30 28 30
Product Engg. and IoT solutions 10 6 5 5
ODM 2 4 4 3
TOTAL 100 100 100 100
Exhibit 11: KAYNES - diversified Product Portfolio
Source: Company * PCB/PCBA/Box build content mix is highest in IoI/IT (40-50%) followed by Telecom (~30%), Industrial (20-30%) and Aerospace/defense (15-25%)
Exhibit 12: KAYNES - leading ESDM player with end-to-end Design & Engineering capabilities…
Source: Company
Exhibit 13: Internationally certified manufacturing facilities backed by a strong supply chain
Source: Company
Long standing relationship with marquee customers; benefitting from strong industry tailwinds
Exhibit 14: Marquee customer base
Source: Company
Exhibit 15: KAYNES – Customer concentration

(Rs mn) FY20 FY21 FY22 1QFY23
Largest customer 456 499 728 279
% of revenue 12 12 10 14
Top-5 1,442 1,349 2,630 889
% of revenue 39 32 37 45
Top-10 1,974 1,936 3,603 1,252
% of revenue 54 46 51 63
Exhibit 16: KAYNES – way forward to capitalize on strong industry tailwinds
Source: Company

Exhibit 17: KAYNES - recent financial performance (consolidated)
Total Income 2,385 1,993 2,732 2,891 3,646 53 26 11,261 7,062 59
Employee costs 150 184 179 191 217 45 13 771 602 28
Other expenses 207 158 207 260 382 84 47 1,006 629 60
EBITDA 400 246 432 412 594 48 44 1,683 937 80
Depreciation 37 46 47 46 48 30 5 187 132 42
Finance costs 71 73 103 92 81 14 (12) 349 256 37
Other income (0) 7 7 26 74 - 180 114 41 178
PBT 291 134 289 300 537 85 79 1,260 590 114
Tax 92 34 79 71 124 35 75 308 174 78
PAT 199 100 210 229 413 108 81 952 417 128
EPS (Rs) 4.3 2.2 4.5 3.9 7.1 65 81 16.4 9.0 81
Gross margin 31.8 29.5 29.9 29.8 32.7 95 288 30.7 30.7 3
Emp cost 6.3 9.2 6.6 6.6 5.9 (33) (67) 6.8 8.5 (168)
Other exp 8.7 7.9 7.6 9.0 10.5 179 151 8.9 8.9 3
EBITDA margin 16.8 12.3 15.8 14.2 16.3 (50) 204 14.9 13.3 168
Dep 1.6 2.3 1.7 1.6 1.3 (23) (26) 1.7 1.9 (20)
Interest 3.0 3.6 3.8 3.2 2.2 (76) (95) 3.1 3.6 (52)
Other income (0.0) 0.4 0.3 0.9 2.0 204 111 1.0 0.6 43
PAT margin 8.3 5.0 7.7 7.9 11.3 300 341 8.5 5.9 255
Automotive 780 823 975 1,127 1,354 74 20 4,279 2,370 81
Industrial 721 532 845 752 912 27 21 3,041 2,105 44
Aerospace, Defense 49 7 66 43 109 125 152 225 178 27
Medical 211 111 236 145 184 (13) 28 676 712 (5)
Railways 233 202 261 390 498 114 28 1,351 731 85
IoT / IT and Others 185 99 119 173 284 54 64 676 375 80
Consumer 207 219 230 260 304 47 17 1,014 591 71

Q4FY23 performance
• Strong result was driven by automotive, railway, IT/ IoT and consumer verticals.
• Added many esteemed global customers in the navy, medical, IT, aerospace
verticals in H2FY23.
FY23 performance
• Revenue mix (FY23): Auto (38%), Industrial (27%), Railway (12%), Consumer (9%).
• Missed some revenue and profits on FY23 guidance given earlier, due to shortage
of chip components.
• Net debt reduced by Rs 1bn to Rs 474mn during FY23 aided by IPO proceeds.

• Strong order book of Rs 26.5bn (2.5x FY23 revenue, 15% from exports).
• FY24 guidance: Rs 18bn revenue, with better margins on higher operating
leverage; vertical mix similar to FY23; box-build share to rise.
• Muted exports in FY23 is also likely to revive and contribute 25-30% to revenue in
2-3 years, on robust traction from the medical and electronics sectors.
• Aerospace and defence sector revenues are expected to increase substantially in
FY24; IT, Medical, Telecom are new emerging verticals for the company.
• Working on indigenising the supply chain by collaborating with a bare PCB
manufacturer and examining post-FAB outsourced semiconductor assembly and
testing.
• Eyeing growth opportunities in the IT hardware components space; plans to
manufacture laptops and high-quality printed circuit boards (PCB).
• Received approval for two PLIs (white goods and telecom) and has applied for a
PLI in IT products.
• Expects signaling segment to open up large opportunity with ~10% of the total
project value contribution from the segment.
• Aims to reduce inflated inventory by having a warehouse in Mysore and through
local suppliers to cut down on time) and further tighten debtor days to achieve
~70 days of WC cycle (FY23: 98 days).
• R&D expenditure stood at 1.2% of revenue in FY23; may rise going forward.
• Effective tax rate will likely improve in the coming years.
• Aims for Rs 2.2bn capex in FY24 to add capacities at Manesar, Pune
(Maharashtra) and Chamarajanagar (Karnataka); this should triple capacity and
drive growth.
KAYNES TECHNOLOGY (FINANCIALS)

Growth (%) 14 68 59 35 30 Net worth 1,387 2,026 9,590 11,031 12,901
Direct costs 2,861 4,894 7,801 10,531 13,690 Total debt 1,484 1,891 1,547 1,487 1,427
SG&A 936 1,231 1,777 2,369 3,040 DT Liability/(Asset) 52 68 77 74 71
EBITDA margins (%) 9.7 13.3 14.9 15.1 15.3 Net tangible assets 649 820 1,073 2,953 3,659
Other income 40 41 114 152 158 Goodwill 23 23 23 23 23
PBT 109 590 1,260 1,907 2,476 Investments (Strategic) - - - - -
+ Associates/(Minorities) (4) - - - - Current Assets 3,108 4,776 7,684 9,550 12,056
Net Income 94 417 952 1,440 1,870 Cash 143 216 4,860 3,333 2,893
Adjusted income 94 417 952 1,440 1,870 Current Liabilities 1,261 2,229 2,960 3,802 4,766
FDEPS growth (%) (1.0) 344.4 128.4 51.3 29.8 Contingent Liabilities 507 993 - - -

EBIT (incl. other income) 342 844 1,525 1,983 2,539 P/E (x) 1,028.7 231.5 101.3 67.0 51.6
OCF before WC changes 442 976 1,713 2,303 3,033 EV/sales (x) 23.3 13.9 8.3 6.2 4.8
- Incr./(decr.) in WC 137 743 1,629 1,024 1,541 P/B (x) 8.1 37.8 10.1 8.7 7.5
Others including taxes 28 22 503 469 609 RoE (%) 6.8 20.6 9.9 13.1 14.5
Operating cash-flow 277 211 (419) 809 883 RoCE (%) 12.5 24.4 21.1 17.9 20.0
- Capex 250 422 581 2,200 1,200 ROIC 12.1 25.2 31.7 27.3 26.0
Free cash-flow 27 (211) (1,001) (1,391) (317) DPS (Rs per share) - - - - -
Acquisitions Dividend yield (%) - - - - -
- Dividend - - - - - Dividend payout (%) - - - - -
+ Equity raised - 4 6,600 - - Net debt/equity (x) 1.0 0.8 (0.3) (0.2) (0.1)
+ Debt raised (44) 301 (336) (60) (60) Receivables (days) 106 102 74 73 72
- Fin Investments (2) 33 4,450 - - Inventory (days) 142 117 134 114 109
- Misc. Items (CFI + CFF) (37) 22 622 55 63 Payables (days) 83 85 72 72 72
Net cash-flow 23 38 191 (1,506) (440) CFO:PAT% 296 51 (44) 56 47
Systematix
PG Electroplast 12 July 2023
Product business (WM, RAC, coolers) to lead in FY24

INITIATING COVERAGE We initiate coverage on PG Electroplast (PGEL) with a BUY rating, and a target price
Sector: EMS Rating: BUY of Rs 1,806, based on 28x FY25E EPS of Rs 64. Post strong FY23 (revenue up 96%
YoY at Rs 21.5bn, EBITDA margin stable at 8.4%, PAT up 107%, and RoE/RoCE of
~19%/~22%), management aims for 30% YoY growth in FY24, led by 43% rise in the
Stock Info product business (WM, RACs, Coolers; likely revenue of Rs 19.2bn), which would
Sensex/Nifty 65,618/19,439 contribute to 68% of revenue (44%/62% in FY22/FY23). Its WC cycle is expected to
Bloomberg PGEL IN improve once sourcing shifts from China to domestic vendors. While operating
Equity shares (mn) 22.7 margins across segments may remain stable, a change in the mix could limit overall
52-wk High/Low 1,678/876 margins. PGEL intends to incur Rs 1.8bn capex (funded via internal accruals) on
Face value Rs 10 RACs (to double capacity) and other products. PLI benefit of Rs 150mn is expected
M-Cap Rs 35bn/ USD 432mn
in FY24. Post 50%/64%/209% CAGR in revenue/EBITDA/PAT over FY20-23, we
estimate 28%/28%/33% CAGR over FY23-25E with ~200bps expansion in its RoE to
Financial Snapshot (Rs mn) 22%. RoIC is also likely to expand to ~19% over FY23-25E, from 9.6% currently.
Net sales 21,599 28,020 35,136
Company profile: PGEL specialises in ODM, OEM and Plastic Injection Molding,
EBITDA 1,760 2,284 2,864 catering to 50+ leading Indian and global brands. The flagship company of PG Group
OPM % 8.2 8.2 8.2 (established in 1977), PGEL, was formally set up in 2003. It has 8 manufacturing units
PAT (adj.) 775 994 1,369 across Greater Noida in Uttar Pradesh, Roorkee in Uttarakhand and Ahmednagar in
EPS (Rs) 36.5 46.8 64.5 Maharashtra, with more than 3,500 employees. The company is pursuing an organic
PE (x) 42.6 33.2 24.1 growth strategy by ramping up the existing capacity and capability in each of its
P/B (x) 8.9 7.2 5.6 product vertical, with focus on backward integration, value addition and economies
EV/EBITDA (x) 23.0 18.2 14.6 of scale. Product business contributed 62% to its FY23 total revenue (FY22: 44%).
RoE (%) 19.6 20.1 21.7
RoCE (%) 17.2 17.3 18.8 Consumer industry: Air Conditioners, Washing Machines, LED TVs, Air Coolers,
Net-D/E (x) 1.3 1.3 1.0 Automotive Components, Bathroom Fittings, Consumer Electronics
Shareholding Pattern (%) FY23 financial highlights: PGEL posted strong 96% YoY revenue growth at Rs 21.5bn,
Mar'23 Dec'22 Sep'22 aided by strong traction in its new RAC business. Despite 170bps contraction in gross
Promoter 61.3 61.3 65.2 margin (17.8%), its EBITDA margin was stable at 8.4%, benefiting from operating
- Pledged - - - leverage. Subsequently, PAT surged by 107% to Rs 775mn, with 20bps improvement
FII 2.0 2.3 2.7 in margin (3.6%). The strong performance led to significant improvement in its RoE
DII 7.2 6.5 1.8 (18.7%, up 460bps YoY) and RoCE (21.9%, up 700bps YoY). A Rs 1.4bn rise in gross
Others 29.5 29.9 30.3 debt (Rs 5.4bn) increased net debt/equity to 1.3x though.
Stock Performance (1-year) Management guidance: PGEL aims to achieve Rs 28bn revenue in FY24 at 30% YoY
2,000
growth, led by 43% improvement in the product business (WM, RACs, Coolers; likely
1,625 revenue Rs 19.2bn), contributing 68% to revenue (44%/62% in FY22/FY23). RAC
1,250
business is slated to expand at 25-30% over the next 2 years. It has started
manufacturing window ACs. It has doubled its washing machine capacity since Jan
875
2023. The WC cycle should improve once sourcing shifts from China to domestic
500 vendors. While operating margins across segments may remain stable, mix change
Aug-22
Oct-22
Jan-23
Apr-23
Jul-22
Feb-23
Jul-23
Nov-22
May-23
could limit overall margins. PGEL intends to incur Rs 1.8bn capex (funded via internal
accruals) on its new integrated manufacturing unit in Rajasthan for RACs (to double
PG ELEC Sensex
capacity) and on a new building and Surface Mount Technology (SMT) lines in Supa
(Maharashtra). PLI benefit of Rs 150mn is expected in FY24. Asset turnover is likely to
rise to 5-6x in FY25 vs. ~4x now.
we estimate 28%/28%/33% CAGR over FY23-25E. RoIC is likely to expand to ~19% in
FY25E from 9.6% currently. With a positive outlook, we initiate coverage on PGEL
with a BUY rating, and a target price of Rs 1,806, based on 28x FY25E EPS of Rs 64.
12 July 2023 PG Electroplast
Story in charts
(Rs bn) (%) (%)
40 35.1 25 21.2 20.9 10
FY20-23 CAGR: 50% 19.5 8.2 8.2 8.2
FY23-25E CAGR: 28% 28.0
30 19 8
21.6 7.1 18.3 18.3 18.3
13 6.8 5
6.2
20
11.0 6 3.6 3.9 3
0.4 3.4 3.5
10 6.4 7.0
0 1.7 0
0

(Rs mn) (%) (Days)
FY20-23 CAGR: 209% 3.9
1,500 FY23-25E CAGR: 33% 3.4 3.6 3.5 5 135
95
90
1,125 3 101
80
77
76
74
72
71
70
1.7
68
66
66
66
64
61
60
60
58
58
56
48
48
750 2 68
45
45
0.4
375 0 34
26 116 374 775 994 1,369
0 (2) 0

(%) (x)
30 2.0
22
20 20
23 1.5 1.3 1.3
15 1.1
13 1.0
15 9 19 0.9 0.9
17 17 1.0
8 12
1
0.5
6
0
FY20 FY21 FY22 FY23 FY24E FY25E 0.0
ROE ROCE FY20 FY21 FY22 FY23 FY24E FY25E
Exhibit 7: Revenue mix (segment-wise) Exhibit 8: Total asset turnover (x)

100% 5 (x)
7 6 7 7 7
4.0
30 26 24
75%
50
61 3.0 2.6
69 2.2 2.4
50%
1.8 1.8
67 69 2.0 1.5
62
25% 44
33
23 1.0
0%
0.0
Product Business Plastic Moulding Consumer electronics Moulding FY20 FY21 FY22 FY23 FY24E FY25E
Fast growing into product vertical (RAC, Washing Machine, Cooler etc.); focus on ODM, cash flow
Exhibit 9: PGEL – Business verticals
Source: Company
Exhibit 10: PGEL’s key clients
Source: Company
Exhibit 11: Future growth strategy… Exhibit 12: …and outlook
Source: Company Source: Company

Exhibit 13: PGEL – recent financial performance (consolidated)
Total Income 5,138 5,352 3,279 4,594 8,282 61 80 21,599 11,116 94
Employee costs 278 273 251 298 406 46 36 1,229 779 58
Other expenses 240 256 200 210 299 25 42 965 607 59
EBITDA 498 349 192 371 757 52 104 1,760 890 98
Depreciation 72 77 81 86 105 46 21 350 221 58
Finance costs 87 94 89 121 176 103 45 479 231 107
Other income 27 28 86 11 12 (57) 6 44 43 1
Exceptional items 2 - - - - - 9
PBT 369 206 108 174 489 32 181 975 490 99
Tax 92 41 36 37 87 (6) 137 201 116 73
PAT 277 164 72 137 402 45 192 775 374 107
EPS (Rs) 13.3 7.7 3.4 6.5 18.2 37 182 17.6 4.8 265
Gross margin 19.8 16.4 19.6 19.1 17.7 (211) (147) 18.3 20.5 (217)
Employee costs 5.4 5.1 7.7 6.5 4.9 (51) (159) 5.7 7.0 (132)
Other expenses 4.7 4.8 6.1 4.6 3.6 (105) (96) 4.5 5.5 (99)
EBITDA margin 9.7 6.5 5.8 8.1 9.1 (54) 107 8.2 8.0 14
Depreciation 1.4 1.4 2.5 1.9 1.3 (13) (62) 1.6 2.0 (37)
Finance costs 1.7 1.7 2.7 2.6 2.1 44 (52) 2.2 2.1 14
Other income 0.5 0.5 2.6 0.2 0.1 (39) (10) 0.2 0.4 (19)
PBT 7.1 3.8 3.3 3.8 5.9 (123) 211 4.5 4.3 19
PAT 5.4 3.1 2.2 3.0 4.8 (53) 186 3.6 3.4 22
Product Business 2,697 3,158 1,410 2,665 5,798 115 118 13,410 4,780 181
Plastic Moulding 2,004 1,927 1,377 1,332 1,724 (14) 29 6,360 5,460 16
Consumer electronics 437 268 492 597 660 51 10 1,610 700 130
Mould Manufacturing - - - - 101 - - 101 38 166
Segment Rev Mix (%)
Product Business 5,250 5,900 4,300 5,800 7,000 6,243 4,354
Plastic Moulding 3,900 3,600 4,200 2,900 2,082 2,961 4,974
Consumer electronics 850 500 1,500 1,300 917 749 638
Mould Manufacturing - - - - 1 47 35

Q4FY23 performance
• Margins improved on cost control, softer commodity prices and operating
leverage.
• ETR low on higher sales contribution from subsidiary enjoying 15% tax regime;
20%+ ETR likely in FY24.
• No PLI benefit recognised in FY23, but received Rs 90mn of state incentives.

• JVA for Google-certified LED TVs would aid in huge scale up of the TV business;
initial launch in northern and NCR regions.
• FY24 revenue: likely up 30% YoY to Rs 28bn on existing capacity.
• FY24 EBITDA: likely up 28% YoY to Rs 2.1bn; mix change may limit the overall
margin improvement.
• Products division could expand at 43% YoY to Rs 19.2bn in FY24; robust
orderbook.
• RAC: 25-30% growth for next 2 years; ~7.5% operating margin in FY24 [1.3-1.4mn
units sold in FY23 (IDU+ODU); capacity utilisation at 80-85%]; has started
manufacturing window ACs.
• Washing Machines: grew at 56.6% YoY; FY23 volumes at 458,000 units; doubled
capacity since Jan 2023.
• TV business - operating margin at ~3%.
• PLI benefit of Rs 150mn expected in FY24; should reflect in other income.
• Shifting sourcing from China to domestic vendors would aid the WC cycle;
importing 100% copper/ aluminum, 80% motors and compressors though.
FY24 capex: ~Rs 1.8bn

• New RAC unit in Rajasthan (40-45% of planned capex) and a new building along
with SMT lines in Supa (Maharashtra) planned.
• Expects to double RAC capacity at Supa (Rs 300-400mn capex).
• Rajasthan unit capacity initially at 25k-30k units p.m., each for split and window
ACs; could double in FY25 if results are favourable.
• 200k IDU, 100K ODU capacity at Supa (would increase by 50k units each ahead).
• Capex funding largely through internal accruals.
• 5-6x asset turnover likely in FY25 vs. 4-4.5x in FY23/FY24.
PG ELECTROPLAST (FINANCIALS)
Growth (%) 10.0 56.1 96.8 29.7 25.4 Net worth 1,925 3,123 3,959 4,949 6,308
Raw material expenses 5,565 8,840 17,645 22,890 28,703 Total debt 1,833 3,839 5,425 6,425 6,925
Gross Margin (%) 20.9 19.5 18.3 18.3 18.3 Minority interest - - - - -
Employee & Other exp. 969 1,392 2,194 2,846 3,569 DT Liability/ (Asset) 49 166 366 386 406
Depreciation 180 221 350 453 545 Net Intangible assets 6 7 12 12 12
Finance costs 184 225 479 568 612 CWIP 60 49 20 20 20
PBT 151 491 975 1,291 1,777 Investments (Strategic) 2 7 22 22 22
Effective tax rate (%) 23.1 23.7 20.6 23.0 23.0 Investments (Financial) - - - - -
Associates/(Minorities) - - - - - Current Assets 2,827 5,828 8,866 10,950 13,132
Net Income 116 374 775 994 1,369 Cash 174 392 396 164 521
Adjusted net income 116 374 775 994 1,369 Current Liabilities 1,987 3,558 5,331 6,520 7,835
Shares outstanding 20 21 23 23 23 Working capital 840 2,270 3,535 4,430 5,297
FDEPS (Rs) 5.5 17.6 36.5 46.8 64.5 Capital Deployed 3,807 7,127 9,751 11,760 13,640
FDEPS growth (%) 344.4 222.1 107.0 28.3 37.7 Contingent Liabilities 77 1,815 - - -

EBIT (incl. other income) 361 759 631 1,734 2,223 P/E (x) 284.2 88.2 42.6 33.2 24.1
Non-cash items 180 221 350 453 545 EV/EBITDA (x) 74.4 52.1 23.0 18.2 14.6
OCF before WC changes 541 980 980 2,188 2,767 EV/sales (x) 5.3 3.5 1.9 1.5 1.2
Incr./(decr.) in WC 109 1,506 1,640 894 868 P/B (x) 18.4 11.3 8.9 7.2 5.6
Others including taxes (141) 269 (1,117) 181 293 RoE (%) 6.0 12.0 19.6 20.1 21.7
Operating cash-flow 573 (794) 457 1,112 1,607 RoCE (%) 9.4 12.9 17.2 17.3 18.8
Capex 425 1,513 1,542 1,800 1,200 ROIC (%) 3.6 7.0 9.6 9.5 19.3
Free cash-flow 148 (2,307) (1,084) (688) 407 DPS (Rs per share) - - - - -
Acquisitions - - - - - Dividend yield (%) - - - - -
Dividend - - - 5 9 Dividend payout (%) - - - - -
Equity raised 41 441 33 - - Net debt/equity (x) 0.9 1.1 1.3 1.3 1.0
Debt raised (12) 7 742 1,000 500 Receivables (days) 76 71 74 72 70
Fin Investments 23 116 218 - - Inventory (days) 48 95 60 58 56
Misc. Items (CFI + CFF) 192 (2,139) (375) 540 542 Payables (days) 80 90 66 66 66
Net cash-flow (39) 164 (152) (232) 357 CFO:PAT% 493 (212) 59 112 117
Systematix
Syrma SGS Technology 12 July 2023
A technology-focused engineering and design company

INITIATING COVERAGE We initiate coverage on Syrma SGS (SYRMA) with a BUY rating, and a target price
Sector: EMS Rating: BUY of Rs 560, based on 40x FY25E EPS of Rs 14. After a robust FY23
(revenue/EBITDA/PAT up 62%/49%/61% YoY on proforma basis), management has
guided for over 35-40% revenue growth in the medium term, backed by industry
Stock Info tailwinds and marquee customer additions (~10 in FY23). The revised PLI scheme
Sensex/Nifty 65,618/19,439 for IT hardware would further drive growth. EBITDA margin may touch double-
Bloomberg SYRMA IN digits from 9.2% in FY23. Improvement in asset turnover (<2x in FY23), backed by
Equity shares (mn) 176.8 ramp up at its new capacities and better NWC capital days (90 days in FY23) should
52-wk High/Low 462/253 boost its current subpar return ratios (~15% RoIC). It aims to incur a capex of >Rs
Face value Rs 10 2bn in FY24, with an asset turnover of ~6x. Post 33%/11%/11% CAGR in revenue/
M-Cap Rs 79bn/USD 966mn EBITDA/PAT over FY20-23, we estimate 32%/38%/44% CAGR over FY23-25E, with
3-m Avg turnover USD 5.1mn RoE and RoIC expanding ~550bps to ~13% and ~21%, respectively, in FY25E.
Financial Snapshot (Rs mn) proforma Company profile: SYRMA is a technology-focused engineering and design company
engaged in turnkey EMS. The company’s products primarily cater to ODMs and OEMs
Net sales 20,484 27,653 35,949
that find end use in automotive, healthcare, IT, industrial appliances, energy
EBITDA 1,878 2,646 3,583
OPM % 9.2 9.6 10.0
management, water purification, power supply and consumer product industries. Its
PAT (adj.) 1,193 1,813 2,474 13 manufacturing facilities efficiently cater to the needs of its customers in north and
EPS (adj.) (Rs) 6.7 10.3 14.0 south India. Marquee customers include, TVS Motor, A.O.Smith India Water
PE (x) 66.4 43.7 32.0 Products, Robert Bosch, Eureka Forbes, CyanConnode, Atomberg, HUL and Total
P/B (x) 5.1 4.7 4.3 Power Europe, etc. Exports contributed 31% of total FY23 revenue, with its products
EV/EBITDA (x) 43.3 29.6 21.4 being sold in over 24 countries; these include, the US, Germany, Austria and the UK.
RoE (%) 7.7 10.8 13.3 SYRMA acquired SGS Tekniks in Sep 2021 and Perfect ID in Oct 2021 to expand its
RoCE (%) 14.9 13.8 17.7 geographical footprint and market share in the domestic market.
Net-D/E (x) 0.1 (0.1) (0.1)
Revenue mix across verticals (FY23): Automotive (20%), Industrial (31%), IT &
Shareholding Pattern (%) Railways (9%), Consumer (32%) and Healthcare (8%).
Mar’23 Dec’22 Sep’22
Promoter 47.3 47.3 47.4 Revenue mix across services: PCBA: 66%; RFID/Magnetics: 16%; Box build: 18.5%
- Pledged Financial highlights: On FY23 proforma basis, consolidated revenue/EBITDA/PAT
FII 4.6 4.9 4.1 grew at 62%/49%/61% YoY to Rs 20.5bn/Rs 1.9bn/Rs 1.2bn, respectively. EBITDA
DII 8.6 7.6 7.5 margin contracted 70bps to 9.2%, with PAT margin flattish at 5.8%. Net-debt/equity
Others 39.5 40.2 41.0
at 0.1x, 1.6x asset-turnover, ~15% RoCE and a strong order book of Rs 30bn (1.5x
Stock Performance (1-year) FY23 revenue) are key positives.
500
Management guidance: For FY24 and the medium term, management has guided for
419 35-40% revenue growth with more room, backed by industry tailwinds and marquee
338 customer additions (~10 in FY23). The revised PLI scheme for IT hardware should
further drive growth. It expects double-digit EBITDA margin going forward (9.2% in
256
FY23). It expects to execute 70% of its order book of Rs 30bn (1.5x FY23 revenue,
175 primarily in automobiles and consumers) in FY24 and the rest in FY25. Improvement
Aug-22
Oct-22
Jan-23
Apr-23
Feb-23
Jul-23
Nov-22
May-23
in asset turnover (<2x in FY23), backed by ramp up at new capacities and better NWC
days (90 days in FY23) could boost its current subpar return ratios. It aims to incur a
SYRMA Sensex
capex of over Rs 2bn in FY24, with an asset turnover of ~6x.
Outlook and View: Post 33%/11%/11% CAGR in revenue/EBITDA/ PAT over FY20-23,
we estimate 32%/38%/44% CAGR over FY23-25E with RoE and RoIC expanding
~550bps to ~13% and 21%, respectively, in FY25E. With a positive outlook, we initiate
coverage on SYRMA with a BUY rating, and a target price of Rs 560, based on 40x
FY25E EPS of Rs 14.
12 July 2023 Syrma SGS Technology
Story in charts
(Rs bn) (%) (%)
40 40 36.0 25
FY20-23 CAGR: 33% 35.9
32.6
FY23-25E CAGR: 32% 29.6
27.7 30 15.8 24.8 24.9 25.0 19
30
11.3
20.5 20 9.9 9.6 10.0 13
9.2
20
12.7 10.2
10 6
8.7 8.9 7.1 6.6 6.9
10 5.7 5.8
0 0
0
Gross margin EBITDA margin (RHS) PAT margin (RHS)

(Rs mn) (%) (Days)
2,800 FY20-23 CAGR: 11% 12 135
10.2
105
FY23-25E CAGR: 44%
95
93
90
90
2,100 9
87
87
87
101 86
84
81
80
7.1 78
78
6.9
76
75
74
73
6.6 72
72
72
69
5.8
63
5.7
60
1,400 6 68
700 3 34
1,193
1,813
2,474
884
630
722
0
0 0

(%) (x)
30 26 0.50
21 0.3
23
18 18 0.25 0.1
16 16 0.1
19 0.0
15 (0.1)
0.00
13 (0.1)
12 13
8 11
8 (0.25)
0
(0.50)
Exhibit 7: Revenue mix (segment-wise) Exhibit 8: Automotive - Revenue, margin trend
(Rs bn) (%)
100%
14 13 8 8 8 10 28
24 9 9 9 FY20-23 CAGR: 45%
4 12 FY23-25E CAGR: 32%
75% 15 20 20 20
15 8 22.7 21
20 22.1 22.5
20.4
50% 18.4
44 31 31 31 5 14
38
35
12.5
25% 3 7
32 32 32
22 23 20 1.3 1.3 2.5 4.0 5.4 7.1
0% 0 0
Consumer Industrials Auto IT & Railways Healthcare Revenue Gross margin (RHS)
Exhibit 9: Consumer - Revenue, margin trend Exhibit 10: Healthcare - Revenue, margin trend
(Rs bn) (%) (Rs mn) (%)
14 53.0 FY20-23 CAGR: 50% 60 3,000 FY20-23 CAGR: -8% 60
FY23-25E CAGR: 32% FY23-25E CAGR: 32%
41.9 53.9 54.3 54.5
11 38.1 45 2,250 45
48.5
38.7 37.2
7 30 1,500 30
17.1 17.5 17.7
4 15 750 15
2,067
1,244
1,619
1,633
2,205
2,866
1.9 2.1 2.6 6.6 8.9 11.6
0 0 0 0
Revenue Gross margin (RHS) Revenue Gross margin (RHS)
Exhibit 11: Industrials - Revenue, margin trend Exhibit 12: IT & Railways - Revenue, margin trend
(Rs bn) (%) (Rs mn) (%)
14 FY20-23 CAGR: 25% 40 3,600 18
FY23-25E CAGR: 32% FY20-23 CAGR: 321%
14.5 FY23-25E CAGR: 32%
11 35.3 30 2,700 14
30.6 31.4 30.3 30.5 9.8 10.2 10.4
29.9
7 20 1,800 7.7 9
5.3
4 10 900 5
1,543
1,803
2,434
3,164
314
24
3.3 3.9 4.4 6.4 8.7 11.3

0 0 0 0
Revenue Gross margin (RHS) Revenue Gross margin (RHS)
A well-diversified player; focus on high margin, flexible volume products

Exhibit 13: SYRMA – Company overview
Exhibit 14: SYRMA- a well-diversified business (FY23 mix)
Exhibit 15: Diversified business with focus on high margin products
Segmental performance; high growth across automotive, consumer and industrial verticals
Exhibit 16: Automotive & EV vertical
Exhibit 17: Consumer vertical
Exhibit 18: Industrial vertical
Exhibit 19: Healthcare vertical
Exhibit 20: Railways & IT vertical
Strategically located manufacturing facilities

Exhibit 21: Strategically located plant to service core verticals
Exhibit 22: SYRMA - Key Milestones

Calendar Year Particulars
2006 Set up our manufacturing unit in the MEPZ-SEZ, Chennai
2010 Set up our manufacturing facility in Bargur
2012 Commenced manufacturing beacons for vehicles
2014 Set up our first research & development department in India
2016 Commenced manufacturing RFID tags
2018 Set up our manufacturing facility in Bawal
2018 Set up our ‘zone of autonomous creation’ to support the provision of rapid prototyping service
2018 Set up another manufacturing unit in the MEPZ-SEZ, Chennai
2019 Commenced offering repair and rework services
2020 Commenced the manufacture of controllers of the EV battery management systems
2020 Investment in our Company by South Asia Growth Fund II Holdings LLC and South Asia EBT Trust
2021 Acquired SGS Tekniks Manufacturing Private Limited
2021 Acquired 75% of the issued and paid up share capital of Perfect ID India Private Limited

Exhibit 23: SYRMA – recent financial performance (reported, consolidated)
Total Income 3,712 3,893 4,669 5,126 6,795 83 33 20,484 10,197 101
Employee costs 197 243 299 279 268 36 (4) 1,060 597 77
Other expenses 511 619 600 463 599 17 30 2,142 1,487 44
EBITDA 253 336 472 478 592 134 24 1,878 928 102
Depreciation 66 72 71 81 88 34 9 312 194 61
Finance costs 25 50 63 64 39 55 (39) 216 64 239
Other income 81 24 79 118 216 166 84 437 139 214
PBT 243 239 417 451 681 181 51 1,787 809 121
Tax 73 68 128 108 252 244 133 556 268 108
Non-controlling stake 6 16 6 10 6 (4) (45) 38 11 230
PAT (after JV/asso.) 164 156 282 332 423 159 27 1,193 555 115
EPS (Rs) 1.2 1.1 1.6 1.9 2.4 101 27 6.7 4.0 67
Gross margin 25.9 30.8 29.4 23.8 21.5 (440) (232) 24.8 29.5 (474)
Emp cost 5.3 6.2 6.4 5.4 3.9 (137) (150) 5.2 5.9 (68)
Other exp 13.8 15.9 12.8 9.0 8.8 (494) (21) 10.5 14.6 (413)
Power & Fuel - - - - - - - - - -
EBITDA margin 6.8 8.6 10.1 9.3 8.7 191 (61) 9.2 9.1 7
Dep 1.8 1.8 1.5 1.6 1.3 (47) (28) 1.5 1.9 (38)
Interest 0.7 1.3 1.3 1.3 0.6 (10) (68) 1.1 0.6 43
Other income 2.2 0.6 1.7 2.3 3.2 100 89 2.1 1.4 77
Effective tax rate 30.3 28.4 30.6 24.1 37.1 681 1,301 31.1 33.1 (196)
PAT margin 4.6 4.4 6.2 6.7 6.3 175 (37) 6.0 5.3 70
Source: Company, Systematix Institutional Research * FY22 segmental revenue is on proforma basis

Q4FY23
• Gross margin impacted mainly due to sharp dip in margins in the consumer
division.
• Order inflow of Rs 16bn during the quarter.
FY23 performance
• Revenue mix: ODM (18%), Box build (18.5%), PCBA (18%).
• Exports contributed 31% to revenue. Momentum is likely to sustain.
• Added around 10 marquee customers (domestic and global).
Guidance
• Mid-term guidance: 40% revenue CAGR, in line with the industry; double-digit
EBITDA margin, driven by industry tailwinds and new customer additions.
• Order book: Rs 30bn (primarily in automobiles and consumers); 70% executable
in FY24 and the rest in FY25.
• NWC days likely to reduce by 10 days from 89 days at FY23 (72-day average).
• Capex of over Rs 2bn in FY24; asset turnover should be ~6x.
Business dynamics
• Consumer division: While ODM is a high-margin model, OEM is a low margin but
large volume business, which generates healthy cash flows due to low working
capital needs; Backward integration could aid margins in both areas.
• Healthcare: Saw slow rebound in FY23; revival may take 1-2 quarters more, but
could surprise once it happens
• Railways: RDSO approval will likely provide a huge opportunity.
SYRMA SGS TECHNOLOGY (PROFORMA FINANCIALS)

Net revenues 8,874 12,667 20,484 27,653 35,949 Share capital 7 1,376 1,768 1,768 1,768
Growth (%) 3 43 62 35 30 Net worth 5,362 5,721 15,403 16,774 18,629
Direct costs 5,980 8,921 15,405 20,769 26,964 Total debt 925 1,943 3,468 2,268 1,068
EBITDA 999 1,259 1,878 2,646 3,583 Capital Employed 6,454 7,896 19,035 19,218 19,885
Other income 169 177 437 415 431 Goodwill 1,182 1,182 1,182 1,182 1,182
PBT 869 1,107 1,787 2,501 3,395 Investments (Strategic) - - - - -
+ Associates/(Minorities) (26) (42) (38) (38) (38) Current Assets 4,999 6,936 18,450 17,180 18,492
Net Income 630 722 1,193 1,813 2,474 Cash 729 369 544 2,272 2,796
Adjusted income 630 722 1,193 1,813 2,474 Current Liabilities 2,613 3,644 6,377 8,230 10,352
FDEPS growth (%) (28.8) 14.6 65.3 51.9 36.5 Contingent Liabilities 197 935 - - -

EBIT (incl. other income) 862 1,125 1,682 1,795 3,035 P/E (x) 125.8 109.7 66.4 43.7 32.0
- Incr./(decr.) in WC 498 1,212 8,781 (3,123) (809) P/B (x) 0.1 10.8 5.1 4.7 4.3
Others including taxes 220 289 (6,084) 582 815 RoE (%) 11.7 12.6 7.7 10.8 13.3
Operating cash-flow 372 (126) (703) 4,758 3,578 RoCE (%) 15.4 16.5 14.9 13.8 17.7
- Capex 194 3,991 1,706 2,000 1,500 ROIC 17.5 17.9 15.9 15.6 21.4
Free cash-flow 178 (4,117) (2,409) 2,758 2,078 DPS (Rs per share) - - 1.5 2.5 3.5
Acquisitions Dividend yield (%) - - 0.3 0.6 0.8
- Dividend - - 265 442 619 Dividend payout (%) - - 22.2 24.4 25.0
+ Equity raised 331 2,715 392 - - Net debt/equity (x) 0.0 0.3 0.1 (0.1) (0.1)
+ Debt raised 454 1,176 1,525 (1,200) (1,200) Receivables (days) 86 78 72 72 72
- Fin Investments 887 - 789 - - Inventory (days) 74 84 105 95 90
- Misc. Items (CFI + CFF) 112 71 (1,666) (182) (265) Payables (days) 78 69 87 87 87
Net cash-flow (36) (297) 120 1,298 524 CFO:PAT% 59 (17) (59) 262 145
Institutional Equities Team

Nikhil Khandelwal Managing Director +91-22-6704 8001 nikhil@systematixgroup.in
Equity Research
Analysts Industry Sectors Desk-Phone E-mail
Dhananjay Sinha Co Head of Equities & Head of Research - Strategy & Economics +91-22-6704 8095 dhananjaysinha@systematixgroup.in
Ashish Poddar Consumer Durables, Building Materials, Small & Midcaps +91-22-6704 8039 ashishpoddar@systematixgroup.in
Himanshu Nayyar Consumer Staples & Discretionary +91-22-6704 8079 himanshunayyar@systematixgroup.in
Manjith Nair Banking, Insurance +91-22-6704 8065 manjithnair@systematixgroup.in
Pradeep Agrawal NBFCs & Diversified Financials +91-22-6704 8024 pradeepagrawal@systematixgroup.in
Pratik Tholiya Specialty & Agro Chem, Fertilisers, Sugar, Textiles and Select Midcaps +91-22-6704 8028 pratiktholiya@systematixgroup.in
Sudeep Anand Oil & Gas, Logistics, Cement +91-22-6704 8085 sudeepanand@systematixgroup.in
Vishal Manchanda Pharmaceuticals and Healthcare +91-22-6704 8064 vishalmanchanda@systematixgroup.in
Aniket Shah Banking, Insurance +91-22-6704 8034 aniketshah@systematixgroup.in
Chetan Mahadik Consumer Staples & Discretionary +91-22-6704 8091 chetanmahadik@systematixgroup.in
Hena Vora NBFCs & Diversified Financials +91-22-6704 8045 henavora@systematixgroup.in
Pranay Shah Consumer Durables, Building Materials, Small & Midcaps +91-22-6704 8017 pranayshah@systematixgroup.in
Pratik Oza Midcaps +91-22-6704 8036 pratikoza@systematixgroup.in
Prathmesh Kamath Oil & Gas, Logistics, Cement +91-22-6704 8022 prathmeshkamath@systematixgroup.in
Purvi Mundhra Macro-Strategy +91-22-6704 8078 purvimundhra@systematixgroup.in
Rajesh Mudaliar Consumer Staples & Discretionary +91-22-6704 8084 rajeshmudaliar@systematixgroup.in
Shraddha Kapadia Consumer Durables, Building Materials, Small & Midcaps +91-22-6704 8019 shraddhakapadia@systematixgroup.in
Shweta Dikshit Metals & Mining +91-22-6704 8042 shwetadikshit@systematixgroup.in
Vivek Mane Pharmaceuticals and Healthcare +91-22-6704 8046 vivekmane@systematixgroup.in
Equity Sales & Trading
Name Desk-Phone E-mail
Vipul Sanghvi Co Head of Equities & Head of Sales +91-22-6704 8062 vipulsanghvi@systematixgroup.in
Sidharth Agrawal Sales +91-22-6704 8090 sidharthagrawal@systematixgroup.in
Chintan Shah Sales +91-22-6704 8061 chintanshah@systematixgroup.in
Pawan Sharma Director and Head - Sales Trading +91-22-6704 8067 pawansharma@systematixgroup.in
Mukesh Chaturvedi Vice President and Co Head - Sales Trading +91-22-6704 8074 mukeshchaturvedi@systematixgroup.in
Vinod Bhuwad Sales Trading +91-22-6704 8051 vinodbhuwad@systematixgroup.in
Rashmi Solanki Sales Trading +91-22-6704 8097 rashmisolanki@systematixgroup.in
Karan Damani Sales Trading +91-22-6704 8053 karandamani@systematixgroup.in
Vipul Chheda Dealer +91-22-6704 8087 vipulchheda@systematixgroup.in
Paras Shah Dealer +91-22-6704 8047 parasshah@systematixgroup.in
Rahul Singh Dealer +91-22-6704 8054 rahulsingh@systematixgroup.in
Corporate Access
Pearl Pillay Sr. Associate +91-22-6704 8088 pearlpillay@systematixgroup.in
Production
Madhu Narayanan Editor +91-22-6704 8071 madhunarayanan@systematixgroup.in
Mrunali Pagdhare Production +91-22-6704 8057 mrunalip@systematixgroup.in
Vijayendra Achrekar Production +91-22-6704 8089 vijayendraachrekar@systematixgroup.in
Operations
Sachin Malusare Vice President +91-22-6704 8055 sachinmalusare@systematixgroup.in
Jignesh Mistry Manager +91-22-6704 8049 jigneshmistry@systematixgroup.in
Sushant Chavan Manager +91-22-6704 8056 sushantchavan@systematixgroup.in
DISCLOSURES/APPENDIX
I. ANALYST CERTIFICATION
I, Ashish Poddar, Pranay Shah, Shraddha Kapadia; hereby certify that (1) views expressed in this research report accurately reflect my/our personal views about any or all of the subject
securities or issuers referred to in this research report, (2) no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed in this research report by Systematix Shares and Stocks (India) Limited (SSSIL) or its group/associate companies, (3) reasonable care is taken to achieve and maintain
independence and objectivity in making any recommendations.
Disclosure of Interest Statement Update

Analyst holding in the stock No
Served as an officer, director or employee No
II. ISSUER SPECIFIC REGULATORY DISCLOSURES, unless specifically mentioned in point no. 9 below:
1. The research analyst(s), SSSIL, associates or relatives do not have any financial interest in the company(ies) covered in this report.
2. The research analyst(s), SSSIL, associates or relatives collectively do not hold more than 1% of the securities of the company(ies) covered in this report as of the end of the
month immediately preceding the distribution of the research report.
3. The research analyst(s), SSSIL, associates or relatives did not have any other material conflict of interest at the time of publication of this research report.
4. The research analyst, SSSIL and its associates have not received compensation for investment banking or merchant banking or brokerage services or any other products or
services from the company(ies) covered in this report in the past twelve months.
5. The research analyst, SSSIL or its associates have not managed or co-managed a private or public offering of securities for the company(ies) covered in this report in the previous
twelve months.
6. SSSIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party in connection with this research
report.
7. The research analyst has not served as an officer, director or employee of the company(ies) covered in this research report.
8. The research analyst and SSSIL have not been engaged in market making activity for the company(ies) covered in this research report.
9. Details of SSSIL, research analyst and its associates pertaining to the companies covered in this research report:
Sr. Yes /
Particulars
No. No.
1 Whether compensation was received from the company(ies) covered in the research report in the past 12 months for investment banking transaction by SSSIL. No
2 Whether research analyst, SSSIL or its associates and relatives collectively hold more than 1% of the company(ies) covered in the research report. No
3 Whether compensation has been received by SSSIL or its associates from the company(ies) covered in the research report. No
Whether SSSIL or its affiliates have managed or co-managed a private or public offering of securities for the company(ies) covered in the research report in the
4 No
previous twelve months.
Whether research analyst, SSSIL or associates have received compensation for investment banking or merchant banking or brokerage services or any other
5 No
products or services from the company(ies) covered in the research report in the last twelve months.
10. There is no material disciplinary action taken by any regulatory authority that impacts the equity research analysis activities.
STOCK RATINGS
BUY (B): The stock's total return is expected to exceed 15% over the next 12 months.
HOLD (H): The stock's total return is expected to be within -15% to +15% over the next 12 months.
SELL (S): The stock's total return is expected to give negative returns of more than 15% over the next 12 months.
NOT RATED (NR): The analyst has no recommendation on the stock under review.
INDUSTRY VIEWS
ATTRACTIVE (AT): Fundamentals/valuations of the sector are expected to be attractive over the next 12-18 months.
NEUTRAL (NL): Fundamentals/valuations of the sector are expected to neither improve nor deteriorate over the next 12-18 months.
CAUTIOUS (CS): Fundamentals/valuations of the sector are expected to deteriorate over the next 12-18 months.
III. DISCLAIMER
The information and opinions contained herein have been compiled or arrived at based on the information obtained in good faith from sources believed to be reliable. Such information
has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy completeness or correctness.
This document is for information purposes only. This report is based on information that we consider reliable; we do not represent that it is accurate or complete and one should exercise
due caution while acting on it. Description of any company(ies) or its/their securities mentioned herein are not complete and this document is not and should not be construed as an
offer or solicitation of an offer to buy or sell any securities or other financial instruments. Past performance is not a guide for future performance, future returns are not guaranteed and
a loss of original capital may occur. All opinions, projections and estimates constitute the judgment of the author as on the date of the report and these, plus any other information
contained in the report, are subject to change without notice. Prices and availability of financial instruments are also subject to change without notice. This report is intended for
distribution to institutional investors.
This report is not directed to or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity that is a citizen or resident or located in any
locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject to SSSIL or
its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently sent or has reached any individual in such country, especially USA, the same
may be ignored and brought to the attention of the sender. Neither this document nor any copy of it may be taken or transmitted into the United States (to U.S. persons), Canada, or
Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. Any unauthorized use, duplication,
redistribution or disclosure of this report including, but not limited to, redistribution by electronic mail, posting of the report on a website or page, and/or providing to a third party a link,
is prohibited by law and will result in prosecution. The information contained in the report is intended solely for the recipient and may not be further distributed by the recipient to any
third party.
SSSIL generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any
companies that the analysts cover. Additionally, SSSIL generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of
any companies that they cover. Our salespeople, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that
reflect opinions that are contrary to the opinions expressed herein. Our proprietary trading and investing businesses may make investment decisions that are inconsistent with the
recommendations expressed herein. The views expressed in this research report reflect the personal views of the analyst(s) about the subject securities or issues and no part of the
compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The
compensation of the analyst who prepared this document is determined exclusively by SSSIL; however, compensation may relate to the revenues of the Systematix Group as a whole, of
which investment banking, sales and trading are a part. Research analysts and sales persons of SSSIL may provide important inputs to its affiliated company(ies).
Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations which could have an adverse effect on their value or price or the income
derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume currency risk. SSSIL, its directors, analysts
or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on the basis of this report
including but not restricted to fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc.
SSSIL and its affiliates, officers, directors, and employees subject to the information given in the disclosures may: (a) from time to time, have long or short positions in, and buy or sell, the
securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation (financial interest)
or act as a market maker in the financial instruments of the company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential material
conflict of interest with respect to any recommendation and related information and opinions. The views expressed are those of the analyst and the company may or may not subscribe
to the views expressed therein.
SSSIL, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness,
merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall SSSIL, any of its affiliates or any third
party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. The company accepts no liability whatsoever for the actions of
third parties. The report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of the company, the
company has not reviewed the linked site. Accessing such website or following such link through the report or the website of the company shall be at your own risk and the company
shall have no liability arising out of, or in connection with, any such referenced website.
SSSIL will not be liable for any delay or any other interruption which may occur in presenting the data due to any technical glitch to present the data. In no event shall SSSIL be liable for
any damages, including without limitation, direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by SSSIL
through this presentation.
SSSIL or any of its other group companies or associates will not be responsible for any decisions taken on the basis of this report. Investors are advised to consult their investment
and tax consultants before taking any investment decisions based on this report.
Systematix Shares and Stocks (India) Limited:

Registered and Corporate address: The Capital, A-wing, No. 603 – 606, 6th Floor, Plot No. C-70, G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051
CIN - U65993MH1995PLC268414 | BSE SEBI Reg. No.: INZ000171134 (Member Code: 182) | NSE SEBI Reg. No.: INZ000171134 (Member Code: 11327) | MCX SEBI Reg. No.:
INZ000171134 (Member Code: 56625) | NCDEX SEBI Reg. No.: INZ000171134 (Member Code: 1281) | Depository Participant SEBI Reg. No.: IN-DP-480-2020 (DP Id: 34600) | PMS SEBI
Reg. No.: INP000002692 | Research Analyst SEBI Reg. No.: INH200000840 | Investment Advisor SEBI Reg. No. INA000010414 | AMFI : ARN - 64917

India EMS Industry Sector IC Report

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

India EMS Industry Sector IC Report

Uploaded by

Copyright:

Available Formats

INITIATING COVERAGE

India Electronics Manufacturing

India EMS Industry 12 July 2023

Speedy adoption, global factors conducive for robust growth

1) Government of India’s (GoI) import substitution initiatives to manufacture

Stock Views ....................................................................................................................................................................... 4

Story in charts… ................................................................................................................................................................. 6

EMS companies - peer comparison ....................................................................................................................................13

Stock price performance chart ...........................................................................................................................................17

IKIO Lighting – (Not Rated) ................................................................................................................................................52

EMS companies – peer valuation comparison

Exhibit 2: Valuation table – 2

Exhibit 3: Global EMS companies – Peer valuation comparison

Exhibit 4: Global EMS companies – Financial highlights

DIXON (Initiate with BUY, TP: Rs 4,966; 15% upside potential)

Exhibit 7: EBITDA CAGR Exhibit 8: EBITDA margin (%)

IKIO (P), 22.3

SYRMA (P), 9.2

Exhibit 9: PAT CAGR Exhibit 10: Overseas revenue mix (FY23)

Exhibit 13: RoIC (%)

Exhibit 15: OCF/EBITDA (%)

Source: Company, Systematix Institutional Research

KAYNES, (23) ELIN, 11

IKIO (P), 44 IKIO (P), 39

PGEL, 1.3 DIXON, 23 AVALON, 133

SYRMA (P), 0.1 KAYNES, 14 ELIN, 66

DIXON, (0.0) PGEL, 60

Exhibit 16: Net debt to equity (x)

Systematix Shares and Stocks (India) Limited

Indian EMS industry slated to post 32% CAGR to Rs ~6tn by FY27

Automotive (30%) 13%

65% Industrial (22%) 66%

Aerospace, Defence and Others (38%)

Source: Cyient DLM, Systematix Institutional Research

Exhibit 21: India EMS Industry - Opportunities in different B2B verticals

• Development of ‘medical device parks’ across States create a robust

• Themes such as Connected, Autonomous, Shared and Electric are

Product positioning – EMS companies choose between volumes and margins

Source: Syrma, Systematix Institutional Research Source: Systematix Institutional Research

Product Testing System Integration

EMS companies - peer comparison

FY20 FY21 FY22 FY23 FY24E FY25E

FY20 FY21 FY22 FY23 FY24E FY25E

FY20 FY21 FY22 FY23 FY24E FY25E

Stock price performance chart

Source: BSE, Systematix Institutional Research

Amber Enterprises 12 July 2023

A leader in RAC spreads wings to non-consumer vertical

customers. In Electronics, wearables is witnessing strong traction with new customer

Exhibit 3: PAT, PAT margin trend Exhibit 4: Net-WC cycle trend

1.6 0.8 1.1 1.6 2.2 3.1

Exhibit 5: ROIC, ROE trend Exhibit 6: Net-Debt/Equity trend

Exhibit 11: Mobility - Revenue, margin trend

6 24.8 25.0 25.0 23

2.3 2.0 2.9 4.2 4.9 5.7

Source: Company, Systematix Institutional Research

Components business to scale up fast; RAC market share gains continue

Manufacturing footprint – focus on backward integration and being close to customers

Exhibit 15: Focus on backward integration and being close to customers

Recent financial performance…

KTAs from management interview and earnings concall

RAC and Components division

AMBER ENTERPRISES (FINANCIALS)