Ladies and gentlemen, good day, and welcome to the Dickson Technologies India Limited Q1 FY 'twenty two Earnings Conference Call hosted by MK Global Financial Services. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Naval Saif of MK Global.
Thank you, and over to you, sir.
Thank you. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. From the management we have with us today, Mr. Atul Lal, Vice Chairman and Managing Director and Mr.
Saurabh Gupta, Chief Financial Officer. I shall now hand over the call to Mr. Lal for his opening remarks. Over to you, sir.
Thank you, Navan. Thanks very much. Good evening, ladies and gentlemen. This is Atul Lal, and we also have on the call today our CFO, Saurabh Gupta.
Good afternoon, everyone.
Thanks very much for joining this earnings call for the quarter ended June 2021. While headline numbers during Q1 indicate the effect of 2nd wave of COVID-nineteen pandemic, we believe that the business has demonstrated our resilience in facing these extremely challenging times and is reflective of its nearing strength and sound strategy. Our factories were operational in the quarter after ensuring that all safety measures and guidelines are ahead of you. Health and safety of our employees continues to be of utmost importance to the company. We successfully conducted vaccination drive in our office in factories for our employees.
We have also selectively assisted the infected members with COVID-nineteen related emergencies. The demand of LED TV was resilient. The peak season for the washing machine segment is expected to be good as the monsoon kicks in. Lighting being a low value product, and we expect the utilization to go back to almost 85% to 90% levels by August. Across all the verticals, we have an extremely healthy order book for the Q2 ahead of the best season.
Now coming to the financial and operational performance of the quarter, which needs to be contextualized around the 2nd week of pandemic, which was undoubtedly horrific, And the growth slowed down from 2nd week of April with further deterioration in May. And then the recovery has started from June. And in July, they're almost back to normal. These numbers are reflective of a very low base last fiscal. The consolidated revenues for the quarter ended June 30, 2021 was INR1868 crores against INR517 crores in the same period last year, which is growth of 2 61%.
Consolidated EBITDA for the quarter was INR48.3 crores against INR17.1 crores in the same period last year, which is a growth of 182%. Consolidated PAD for the quarter was INR18.2 crores against INR1.6 crores in the same period last year, which is almost 1,000 percent growth. Gross margins and EBITDA margin contraction year on year was primarily driven by substantial change in the segment mix with higher increase in the share of business during the quarter for ADTV, which is prescriptive with the lower margin. And also because of the lower turnover, there was an unfavorable operating leverage across the businesses and higher commodity prices impacting our own business. A rapid and large increase in commodity costs, which has been escalating sharply since last year November and continued the trend in Q1 FY 'twenty one impacted the operating margin of the ODM business.
However, we have been able to a large extent address the margin pressure partly through combination of calibrated pricing actions, inventory planning and value engineering. Margins will start normalizing, including the scale of business returning to normal. Our food and trust structures in large scale also give us a competitive edge in this challenging situation. We strongly believe that we have a platform to sustain stronger than any growth moving forward with strengthening in the overall demand environment. The company has always maintained a conservative financial profile with an optimum capital structure and investment grade credit rating.
We are well positioned with a robust balance sheet with a cash balance of INR 174 crores and net debt of INR54 crores as of 30 8 June 31. Our balance sheet extends and enough credit lines sometimes enabled us to weather any future uncertainty and invest in the long term development of our business. It has enabled us to continue to invest in our organization and in people through the entire challenging period of COVID. The inventory levels have increased due to weak demand and advances paid for securing components of raw materials due to supply chain challenges across various businesses. However, this remains a key focus area of the company, and it is expected to normalize in the coming quarters with the scale of business returning to normal levels and above order book.
Capital allocation in our case will always be prudent and prudent with a huge focus on cash from working cycle and working capital management. Working capital will be at 0 in the June quarter also. Our basic approach to capital allocation policy emphasizes on return on invested capital and financial stability and has successfully delivered a strong ROC and ROE of 31.5% and 27.1%, respectively, at the end of Q1, making confident the same will be sustained in the coming quarters and years. Now I'll share with you the performance and the strategy needs of the verticals going forward. 1st, Consumer Electronics.
From this quarter onwards, Consumer Electronics segment will also comprise of the revenue generated from reverse logistics business in addition to our ACPG business. This vertical and its momentum and Kiban's true equivalent with revenues for the quarter under review growing more than 3.6 times to INR1262 crores against INR247 crores in the same period last year, Debt per growth volume and pricing growth. In the current quarter, the revenue in the VACV PCV and reserve origination business was INR 9 crores and INR 1.7 crores, respectively, out of INR 4.62 crores. Operating profit saw extremely good growth of 2.43 percent, that is INR 30 crores against INR 8.7 crores in the same period last year. We presently have a capacity of INR 4,400,000 zips, including backware integration in LCM and SMT-nine, which is the largest capacity in India.
We have a target production of large screen sizes like 70, 75 and 85 inches the current quarter for anchor customers. Our expansion plan of the capacity to 45,500,000 will be executed by next month, adding new automatic 65 inches integrated line with MCM and FIM and 1 more high speed SMT line to meet customer demands. The increased capacity of 5,500,000 will take care of 35% of engine requirement. Further capacity of our assembly line will increase to 2,700,000 per annum from 1,800,000 earlier. We have a total area of more than 400,000 square feet in our integrated campus of Toorupi, which is completely backwardly integrated with deep manufacturing infrastructure.
We are also investing in the extensible delivery in the campus, soon to be completely self sufficient in this aspect also. So we are more vertically integrated and we have the largest capacity community as compared to any of our peers in this particular vertical in our country. Monitors, we have got orders, as I had shared with you last time, from largest global brands for manufacturing of LED monitors, and the production is likely to commence from Q3 of this fiscal. The line is now under installation, and this will be completed by August end. This will create a capacity of 1,000,000 LED monitors and the production will be commencing by 2.3.
The expected volume in year 1 would be in the range of €500,000 We expect the order book will be significantly from year 2 onwards up to almost $1,000,000 a year. The revenues and profitability numbers are being run down, but we expect the margins to be in the similar range as we continue. Slide 6, the revenue for the corporate business growth was 98% on a low base. So the revenues were INR150 crores in Q1 against INR78 crores last year. And now we are back to strong growth trajectory, which we have been demonstrating.
We are having a very strong order book in this vertical in Q2. Operating profit witnessed a growth of 19% at INR 6.9 crores against INR 5.8 crores in the same period last year. The margins in the lighting business have contracted due to the diverse operating leverage because of reduced volumes and the impact of the input costs as a result of the lag in passing on the price increase. And some of that has been passed in Q1. The margins will start operating and normalizing from the current quarter with the scale of business returning to normal levels.
Almost 80 brands in the lighting business is with us on an OEM business and also a large percentage of the sales is being sourced from Nixon today. We are India's largest OEM player in mining and have the largest capacity in various SKUs. In LED bulb, we have a capacity of 300,000,000,000. It is almost 50% of engine requirement. We have also developed solutions for a smart LED bulb that can sound lighter and LED bulbs for various customers.
We have expanded our capacity in batches to 5,000,000 against the 40 inventory requirement of 9,000,000 per month. In downladder, we have expanded our capacity from 600,000 per month to 1,500,000 per month. The 40 inventory requirement is around fumable. We are in the process of developing outdoor lighting solutions available to launch for September 21, which also includes the street lights. We have studied the PLI of LED lighting components and have narrowed down on mechanical, end masters and LMS, the slight management systems.
The numbers on CapEx and profitability are being rolled out and we will be filing our applications for the deadline of 15th September 21.
Excuse me, this is the operator. Sir, I'm sorry to interrupt. The audio is going low from your line.
Okay. Thank you. Coming to Home Appliances. Revenues for the quarter saw a growth of 193% year on year on a low base, that is, it increased INR271 crores from INR24 crores last year. Operating profit increased to INR4.4 crores from INR0.2 crores last year.
The operating margins were lower at 6.3% due to unfavorable operating leverage. Although we were confident that margins will normalize in Q2 since the order book is very, very healthy from the current quarter. And we've also been able to pass on the increase to multi prices to our principal customers. We currently have 150 old models across semi automatic category, which is the largest portfolio right from 6 kgs to 14 kgs. And we are further expanding our capacity in semi automatic from 1,200,000 to 1,500,000.
This will be executed within the month of August this year. We acquired a new property which is joining our current infrastructure setup, which will help us in meeting the increased demands from our customers. The facility for top loading for the automotive insertion machine throughput is now ready with the machine installed, the trial is completed, samples have been shared and the mass production will start in September 21. We have approximately 96 variants across 6 to 10 kilograms category, which is the largest flood portfolio available with any brand or manufacturer in the country with an annual capacity of 6 lakhs. We have always closed the agreement with a large MNC for this and some new contracts are also in work.
Mobile phones and AMS division, the revenues for these divisions for the quarter in review was INR306 crores against INR53 crores of mobile revenues in the same period last year.
In the current quarter,
the revenue of sector box business and medical equipment business was INR55 crores INR53.5 crores out of INR76 crores. Operating profit was INR4.2 crores in Q1 FY 2022 against INR2 crores in same period last year. The margins are contracting this business on account of adverse operating leverage and initial ramp up costs in our new factory from where we are excluding Mokova in Nokia. The automotive again looks very healthy, primarily focused on exports. The margins will normalize from Q200.
Production commenced for our anchor customer Moprola in mid March 2021 in the new factory, and export to Southeast Asia and on the and export to Southeast Asia and North America has already started. Production for Nokia commenced in February 2021, and we are in the process of adding a new mine as our volume deliveries from Q3 onwards. The tie up with Motorola to one of our favorite smartphone is for both global and domestic market, and almost 65% to 70% of our senior revenues in the PLI will come from this customer with a large portion coming from export markets. And we have a strong order book from Mercola from Q2 onwards. We will be the 1st Indian mobile manufacturing company to manufacture and export 5 gs mobile phones to U.
S. We have started investing to increase capacity to 15,000,000 phone annually in the next couple of years for meeting the threshold as against 3,000,000 as of today, and we are confident of worsening the revenues in current fiscal from the YLK airline. We are also in discussions with another customer in North America, who are manufacturing smartphones for their suppliers to the various carriers. Production started for Samsung 4 gs phones, and now we have a very strong rollover of almost 1,000,000 4 gs phones per month in Q2. We have already taken a land bank of 5 acres in Moira and plan to make a great integrated mobile factory in this facility.
Echo boxes, we have manufactured almost 6 lakh type of boxes for Jio, Dish, TV, dedicated and others in Q1. We reported revenues of INR55 crores against 2 with 2.9% operating margin. The order book in this vertical again looks very healthy with 500,000 set top boxes per month. But however, in this business also, there are supply chain challenges due to availability of semiconductors. Our latest customer acquisition in this vertical is Sun TV, and we start manufacturing set top boxes for them from September onwards.
Medical Electronics, we have sold 145 units of the RT PCR machine to Montvale. The revenues in this vertical was around 3.5 crores with an operating margin of 28% and a strong ROCE. Security Servalling Systems, for this quarter, it estimates a very strong growth of 4.62%. That is INR 75 crores against INR 13 crores in the same period last year. The operating profit also increased from INR 2 lakhs to INR 2.6 crores in this quarter.
The vertical has come back to the normalized utilization level. The order book in this vertical looks strong, and we will be further expanding our capacity in this vertical. Apart from this, I would like to update about the opportunities with the company's history. The refiliators, as we have been guiding, the company has kicked off the refiliator project. We've got the market study done, Sanal is a technology partner, product design is under progress, and we have started building the theme in both the freight R and D head project and R and D head.
We'll be initially creating a capacity of 600,000 DC category, which will be further ramped up to 1,000,000 against a total requirement in India of 10,000,000 under various product categories, right from 170 liters to 2 20 liters. We're in the process of acquiring 10 acres of land in Greater Nodal for the manufacturing facility, and we are confident of receiving the requisite approvals for the sale shortly. We have started engaging with various potential customers and the mass production is most likely to commence from Q3 next fiscal. Laptops and IT hardware, we announced slated for the industry under the IT hardware for CLI. Our factories have been approved and qualified by 1 of the largest brands in our manufacturing lab process tablet.
Over the next few weeks, we will work out the remaining potential cost structures to arrive at the operating profitability for this particular vertical. We are also in active demand among leading global brands. Telecom and networking products, Dixxon has entered into MOU with Adi Enterprises to form a client venture through a wholly owned subsidiary Dixxon Lake Tour of Clients Private Limited. The JV Company has filed applications with the Ministry of Communications to avail benefits under Telecom and Networking Products, PLI, the scheme for IoT devices, modem, routers, sector boxes, etcetera, for telecom industry. And Airtel will be the anchor customers.
We keenly look forward if we are going to be a beneficiary under this scheme. Post executing on mutually acceptable agreements by the parties in the next 1 month, the JV company will be 74% owned by Dickson and 46% owned by Hardik Enterprises, and the operations will be managed by Dickson. We have finalized an agreement for supplying both ends and routers and should start supplying by Q3 of the fiscal. The PLI scheme for AC components, PCB assembly for controllers. We are working with a relevant partner, existing partners with one of the main suppliers to Daikin to form a JV to jointly apply under the PLI to manufacture PCB assembly for controllers before the deadline of 15 September 2021.
Presently, our business with our existing partner is around RUB125, RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB 100 and RUB for servicing the global markets. Variables and wearables. On the wearables, the Indian market is the 3rd largest market globally and one of the fastest growing markets. We have started manufacturing TWS for both and we're in the process of further deepening our relationship with both who are different to strategic level. This is an opportunity for us to pack an emerging brand only for India for global markets.
It's a keenly everything that dealer is keen also for this category to boost investing manufacturing and it is a high growth category and we definitely pursue the same as the SMB. So that is what I wanted to share. And now me and Saurabh are there to respond to your questions, please.
Thank you. Ladies and gentlemen, we will now begin with the question and answer We have the first question from the line of Ravi Swaminathan from SPA Capital. Please go ahead.
Hi, sir. Good afternoon. My first question is with respect to the new segments that we are planning to get into, laptops, telecom, AC components, wearables, etcetera. What kind of revenue we can expect over 2 to 3 year period? Even a broad sense, it will be great for the end of and it is possible the profitability of these segments also.
So if you can dwell upon this, a bit more, it will be great.
So Ravi, the numbers are being worked out. However, I'll share with you the broad numbers. In the Telecom venture, we expect to reach revenue of almost INR 2,000 crores in a couple of years. In the PLI for AC, DCD, we aspire to reach around INR 200 crores INR 450 crores in the next year. In the case of CLI or IT products, the revenue is going to be around INR 800 crores.
And then refrigerator, once the production is stabilized and we reach a level of INR 500 1,000,000 to 0.6 1,000,000, it's going to be around INR 500 crores. Now in the prescriptive business, along with some TLI benefit, the operating margins are going to be in the range of 2.8% to 3.5%. In the ODM business, we feel like refrigerators will not be somewhere that we need to tend to stick to.
And the variable numbers, we
use new gentlemen know fairly well. Got it, sir. And the
variable business, how much revenue over a 2 year period?
Variable business, already the revenues of both are in the range of around RUB 1500 to RUB 2000, and they're growing very, very fast. So the manufactured supplier revenues are almost 60% of that. So we feel that in the year 1 itself, the partnership is going to be formalized, is going to be somewhere in the range of around 700 to 18.4%.
Got it, sir. And what kind of capital investment, say CapEx alone, that we will be required to do for all these products, new products?
So the number that number crunching is happening because we are still waiting the PL approval and the agreements to be formalized. Okay. It will be quite premature to share the CapEx numbers, that number is still.
Yes. Rahul, we will be in a better position to share the numbers on CapEx in the next couple of months, maybe our next earnings call, because all things are getting finalized on the approval that we have received and the approval that we will receive in the next couple of months.
Got it. Got it. And with respect to the existing segments, especially the margins in lighting and home appliance category, yes, it has kind of taken a dip during the Q1. But assuming the parking amount of prices to end customers plus the mix improving, So what kind of EBITDA margins we can expect in these segments? Can they go back to the margins that we have seen, say, last year or the year before last year, like 10%, 9% 10% range?
So we are fairly confident that in the coming quarters, partially recovery will take place in Q2 itself. And the key on that, the margin in lighting would be somewhere between 8% to 9%. And in the case of washing machine, this is going to be between 9% to 11%. Got it. And
the operator, I'm sorry, but we have participants in queue. Can you come back with your questions, please?
Sure.
Thank you. We have the next question from the line of Bharat Shah from ASK Investment Manager. Please go ahead.
Atul, these are early days for UMI Live, but I just wanted to get your overall opinion because we have an inside view of how these teams are being formulated. So I wanted to understand how do you see these schemes in terms of approach, practicality, speed, efficiency, any other observations on any of these aspects to get an idea whether this is real plans of altering the manufacturing footprint or not?
It's Shar. Undoubtedly, we see a very significant level of conviction and commitment from the government side in establishing the footprint in these PLI sectors. So I think let's look at what's happening on the mobile side. Initially, there were challenges. However, and those challenges are more external than internal.
So the government has been flexible and they have shifted the base here. They have extended by 1 year. And large global brands have already started sourcing from within India. In digital scale itself, we think we got a few good sometimes only in Q3 of last year. We have been able to set up our factory within a very short time of 4 to 5 months and the auction has been ramped up.
And Mokola is going to shift almost 8% to 10% of the global requirement of this factory. So that is the 1st major achievement for the industry for Dixin as well. My sense is there would be some execution challenges, but the government is committed to make it a success. Now, the same rollout has happened for IT products. Although there, the canvas is much smaller.
And there, my sense is it's only going to be focused more on the domestic market to start with, at least with domestic sales. And that's where we're going to be participating. Also, what one is seeing is that when the large manufacturing or the final product takes place, the deepening of manufacturing through more value addition creation and also creation of the component ecosystem even works. Well, one has to keep fingers crossed that things go as per plan, but I'm positive about it. So same is the case with the telecom PLI and same is the case with the AC and LED lighting PLI.
So definitely, one is convinced now that these foods being sold in India will be manufactured in India. The manufacturing depth will expand. And also in some of the categories, India will become a base for exports, which will be a typical China for the situation. That's what my sense is. However, next 2 years, I will be extremely important both for the beneficiaries of the scheme and also the government because what we are committing to the stakeholders has to be delivered upon.
So that's the situation, sir.
And in terms of speed, flexibility, responsiveness, whether the schemes are formulated in a practical way, keeping in mind industry vertical dynamics, any comments there?
So I think that is a very transformational kind of a change with the present dispensation that there is a lot of interfacing happening between the industry and the government. They are looking at the industry's viewpoint. They're flexible. They genuinely want to create this footprint in India. Now there will always be some gaps, but there is a very significant profitability around this, at least in the electronic sector.
Sure. Thank you. It's okay.
Thank you. Thank you, Mr.
Thank you. We have the next question from the line of Aditya Bhatia from Investec. Please go ahead.
Hi, good evening, sir.
So my first question
is on the consumer electronics business, wherein capital employed appears to have turned negative this quarter. So just want to understand what are the changes that we made and is this something which is sustainable?
This is basically the management of Paradigm. So it's a significant improvement in the operating cycle, which has led to this kind of an operational market for us there. And we feel it's sustainable.
Because if I remember, sir, earlier, there used to be this issue of us paying customs duty or some GST related charges and recouping that from our anchor customer with a bit of a lag. So have there been any major changes that you have made in those contract terms? Or is it something else?
So basically, I think it's because of our operational efficiency in managing that that we have been able to turn this around. So in a prescriptive business, otherwise our credit is always higher than the database. And through our internal efficiencies, the point that you have raised, we have all now that has been addressed. In fact, we have bettered those things in our paper.
Perfect. Perfect. And for the mobile phone business, you mentioned that we should be surpassing the ceiling limit for FY 'twenty two. Just want to clarify, are we looking at the original limit of INR 4,000 crores or the revised limit after the base year being moved forward by a year?
So as for the extended norms and the policy guidelines, the ceiling is INR 2,000 crores of current fiscal. But we'll be aiming to be close to the last the original field in the profile course. That's what we're aspiring for, somewhere close to that.
Perfect. Perfect. That's great, sir. And lastly, are you facing any significant component shortages? Because I do understand that you increased your inventory levels to tackle that.
But do you expect any significant shortages still impacting any of the segments? Thanks.
So, Adithya, there are significant supply chain challenges in every vertical. So let's say, lighting vertical, there is a huge shortage of the driver IC, but we have been able to accumulate adequate inventory for that. And I think we are ahead of industry there. The case of televisions, again, there is a shortage, but that because we have associated with large principles, we're able to cover it up. However, lately, there are challenges because of the typhoons in China, right, and also the components of life from Vietnam because the factories are shut there because due to COVID.
In mobile, again, there are challenges in display and semiconductor. But the kind of order book that we have and what I'm seeing that our people have been able to cover, we are in a good position. There are challenges, but I think we've been able to cover it to a very large extent.
So Anurag, just to add to
it, so what we have
done, we've also accumulated inventory to take advantage of the increase out of it. So as the business is now returning back to normal, and if you see, our inventory levels have gone up. So that is on account of second advanced payment that we have made to make those inventories. This is more strategic in nature and that will put us in a very advantageous position. So gradually, we will see that inventory levels also coming down as the number get converted to a finished group and brochure.
So clearly, have taken a strategy call to filter some of the components in semiconductor there.
Perfect, sir. That's very helpful. Thanks.
Thank you, Uskar.
Thank you. We have the next question from the line of Renu Baid from IIFL. Please go ahead.
Yes. Hi, it is in some. I have 3 to 4 questions. So my first question is, when we look at the broad portfolio on the right hand side, where are we today in terms of the approval for exports for which you're working? And how do we see the right hand exports portfolio ramping up?
With expected growth coming in from 2Q onwards, so there are we on that?
So we need to have certain safety approvals from the countries that we are targeting. Safety and reliability approvals, I'm expecting that we'll receive them somewhere around mid of August or end of August. And then that business can be gone
agents that we are looking at?
So it's going to be a mix of U. S. And Western Europe.
Sure.
So secondly, when we look at the OEM portfolio in this quarter, both lighting as well as washers, almost half on a sequential basis. So the inventory built up, which Saurabh also mentioned, was largely on account of both these business segments? Or there is also some share of inventory stopping by customers in the PMS business? And should we expect the volume and new businesses? Was the volume portfolio reverting back to normalcy into Q3 with strong order backlog?
So, Renu, in our EMS business, the inventory buildup does not have an impact on the balance sheet. It's almost operating slightly increasing except for certain inventory buildup in Motorola and some working capital intensity increasing in Motorola because of the initial ramp up phase. And the main inventory increase has been on the raw material side in both lighting and washing machine, primarily because of order book trending on 15th April and May were even worse. I just bear with you some data points. On an average, we do approximately 2 to 4 bulbs a month.
And in this quarter, the volume has fallen to 54 lags a month. In the case of washing machines, we are doing almost 90 ks to 1 lags washing machines a month. And in this quarter, it decreased to 54 ks per month. So that is what happened to demand after the lockdown. Now the order book is extremely healthy.
In lighting itself, in July and from August onwards, we are back to almost 25% 90% of our capacity utilization. In the case of washing machine, it's much ahead. Normally, we do around 100 ks, 170 ks. In the month of July, we should close around 125 ks. In the month of August September, the order book is almost 115 ks.
So the order book is very healthy. And I think in this quarter itself, the situation will come back to normal.
Got it. That's pretty encouraging. And lastly, when we look at the LED TV portfolio, while the EMS business has been doing fairly strongly, we were also working on a smart TV portfolio on the OEM side. So where are we in terms of the design approvals and getting the customers on board? And how do we expect the ODM portfolio within the early television segment to open?
Mr. Rehanu, on the PV ODM side, solutions are ready in noise based solutions. However, there's and the customer acceptability there, at least from the Tier 2 side. However, we are having an issue with Google on the IT side. We have still not been able to get their go ahead on the Tata license.
We are posting with them, but that is still not materialized. So I cannot give you any visibility there. On the analog side, the demand is limited. So it's mainly smart and that's also on the Android platform. The solutions are ready.
The solutions are acceptable. We're still waiting for a Tata license on Google. That's what this data for us.
Got it. That's it. Thank you so much and all the best.
Thank you.
Thank you.
Thank you. We have the next question from the line of Sonali Saldanakar from Jefferies. Please go ahead.
So thank you for the opportunity and good afternoon to both of you. So my first question is regarding the IT hardware PLI. So we understand these are initial dates for you as well. But if you could share the broader contours of the PLI and the sort of ceiling revenues per year as well, that would be quite helpful. And also an ancillary question to this, to another participant's question.
You mentioned some revenue from the upcoming opportunities across each of the segments. So just to clarify, this is the per annum revenue we are targeting over the next couple of years, right?
That's right.
So Sonali, on IT hardware, the basic controls are that we need to make an investment under the PLI for INR 20 odd crores over a period of 4 years. And the incentive outflow over a period of 4 years is INR 110 crores for domestic companies. So here also they have created a separate task for domestic companies like similar to the way it was done for mobile, where the government wants to create domestic champions as well. So this is the number that I mentioned to you as the domestic companies and they clearly bifurcated and said that any laptop costing less than RMB 30,000 at a factory level. So these are factory level prices and a tablet costing less than RMB 50,000.
So that will be a separate there will be a separate track for domestic companies. That is actually where PIXN comes in. So we are, of course, we just recently got the approval. As Mr. Lal mentioned in his opening remarks that have signed an MoU and our factories have already been audited and qualified with one of the largest banks.
I'll be not in a position to take the name because still the type of agreements are closed. But we are here working with our partner, customer to finalize the numbers on revenues, cost structures and the profitability. And we are also in discussion with other brands as well. If you look at the ceiling revenues that have been defined under the P and I, so basically the ceiling revenues over the next 4 years is around INR 4,900 crores. And the way it happened, the way year wise it is INR 300, INR 600, INR 2,000 crores.
So normally just the first three numbers is INR 300 crores. So we would make definitely make an attempt to achieve the ceiling revenues in each of the year. But yes, lot of things lot of these things will be materialized over the next few months. So we will have a better visibility once we finalize the numbers with the brand that we're talking to. Also, here also, if you look at the demand for Zukir is to create a component ecosystem.
So there is a delay down guidelines
Ladies and gentlemen, this is the Chorus Call conference operator. Kindly stay connected while we try to reconnect with the management. Please stay on line. Thank you. Ladies and gentlemen, this is the operator.
We now have the line for the management to be connected. Please proceed, sir.
Excuse me, sorry we got disconnected.
Hello? Yes, Saurabh. Hi. Sorry. So I don't know where the last so I don't know where last thing we got disconnected.
But broadly, yes, so, I mean, the way
I was saying that there
are separate types of domestic companies, we need to do a committed CapEx of INR 20 crores, the incentive outlay for the domestic companies and then INR 10 crores. And there are also certain data and guidelines for value addition, which is linked to getting that incentive. And we will definitely make an effort to achieve the field revenues, which is basically INR 4,900 crores over the period of 4 years and starting with INR 300 crores in the 1st year.
Got it, got it. My second question is what kind of normalized margin should we look on a consolidated level from the coming quarters now that business once the business assumes scale? So are we expecting 3.5% to 4%?
Yes, it will be. Yes, so
that is in the similar range. So 3.5% to 3.75% is what I think will be the margin because our growth going forward will be happening more in the prescriptive business. So a significant portion of our revenues will be coming to mobile, then actually the laptops, wearables, but into telecom. So these are all a prescriptive business, so the margins are going to be in the range of 2.5% to 3% Got
it. And my last question is, how is the demand scenario looking at right now? You did mention that July, these are back to normal, but how are we expecting it to pan out, especially also in the context of the affected season? That's it from my side.
So, Sonali, in the current quarter, the order book and the forecast looks extremely healthy. As I shared with you in the 2019 segment, we are back to almost 85%. The LED bulbs is back to 160 lakhs 170 lakhs. In the cable pattern, this month, we're going to do highest ever, almost 25 lags buttons, letters in order to 5 lags. Same with the case in Gaussian machine, this month, we're going to close at 125 ks.
The order book is 140,150 ks, which is normally the highest ever class. In television, again, in this month, we'll be at 200 ks. The next month, we'll be around 75 ks. In September, we feel we're going to be somewhere close to around 400 ks. So the demand looks very good even in mobile, not for domestic but also for exports.
We're going to be significantly ramped. I think almost 400 ks, the 300 crores of revenue from the cola for exposed to U. S. So it looks good. However, one has to as far as the domestic market is concerned, one has to keep the fingers crossed because we are still not out of the COVID impact.
And whether third wave is going to be there or not there, what impact it is going to be there, one has to wait a little. So I'm slightly sanguine about it. I'm cautious about it. But as of now, the forecast looks very healthy.
Got it, sir. Thank you. That's it from my side.
Thank you. We have the next question from the line of Bhumika from DAMP Capital. Please go ahead.
Yes. Good evening, sir. So most of your questions have been answered. Just one or two things. In terms of TV, we have seen a very sharp ramp up in volumes and revenues continue to remain quite strong.
Given that we're meeting a lot of the customer requirements in India's requirements, higher screen TVs, how is the how can we see growth going forward over a medium to 2 to 3 year perspective?
Hi, I'm sorry to interrupt, but we've lost the line for the management. Bhoomika kindly hold on. Participants, please stay connected while we reconnect the management. Ladies and gentlemen, we now have the line for the management reconnected. Bhumika, please could you repeat your question?
Yes, sir. Sir, I was just asking on TV, more from a medium term perspective, these are few years where we've actually already grown quite aggressively and added a lot of customers. While I understand there will be some value growth on higher screens, but in terms of volumes, if you can give some outlook on how quickly or how the growth looks like?
So, Bhumika customer acquisition is a normal exercise and also getting a larger share of customer wallet is a continuous effort. So we feel that this capacity that we're creating of 5,000,000, 5,500,000, in next 2 years, we'll be somewhere near to 4,500,000. That's what our internal estimation says. And further in the same infrastructure, the LED monitor line has been so that will be on a very minimal CapEx that further enhances the operating leverage. And then the next step is
the deepening of the manufacturing.
So the SMT and the PCB capacity has been increased by almost 3 times in the last 2 years. Then the next step is to deepen the manufacturing of the plastics and mechanicals and then metals. So we're very confident that for some of our anchor customers, the unit cover, the back cover and the front bezel go half a 100 basis back in. So that's the strategy, scale and deepening of our factories. And if at all, we are getting the Google license, then migrating to ODM.
Okay. So in terms of the fully automatic washing machine, we already are having anchor customer. But if you could just comment on additional customers engagement and how quickly do we see this capacity being ramped up or volumes being ramped up to the capacity of 600,000?
So our supplies to the anchor customer is going to start from October, November. And to the other customers, it's going to start from September before the testing period. That's what we are targeting. Now what we're starting is with the Platform 1, that is from 6 kilograms to 7.5 kilograms and the 2 wins for the platform 2, that is from 8 kilograms to 10 kilograms would be arriving by December or January. So I expect the capacity utilization up to 85%, 90% of the installed capacity of 600,000 would happen on the monthly run rate basis, the second half of next fiscal.
Sure. Sure. That's it from my side, sir. I'll come back in the queue. Wish you all the best.
Thank you.
Thank you. We have the next question from the line of Bharat Shah from ASK Investment Managers. Please go ahead.
So I thought the second phase obviously has come as a bit of a rude interruption to our plans. But is originally we were considering that when do you think we are touching that 5 digit growth turnover number now and hopefully double of that thereafter? What industry do we think now we are hitting back?
So, Mr. Shah, the final goal and the journey is the same, which we have been sharing with our partners, the other stakeholders. So we are confident that in this fiscal sense, the revenue growth would be significant. We should be somewhere around 11.5% growth this fiscal itself in spite of the Q1 getting impacted. And we feel that as compared to the original number of last fiscal of INR 6,400 crores, we should be 3x of that in 2 years' time.
2 years after the current year? That's right. So my fiscal 2024 is what you're saying?
Yes, 2023, 2024.
So which is a year when we should be hitting closer to $3,000,000,000 turnover.
And hopefully,
given the kind of change in the product mix, our profitability as well as capital efficiency, both should improve from day to day?
That's what we are aspiring, sir. So the trajectory and the strategy, there is absolutely no change. It's this quarter was a blip because of the pandemic.
Sure. And capital efficiency also, which has always been our mark of Dixon, superior capital efficiency, lower non working capital and very frugal manufacturing, strong emphasis on cost containment. So all that has resulted into very solidary performance on capital efficiency. Are we seeing that we see growth in significant scaling? The return on capital employed per se should hit fresh benchmarks or it will be in a similar range to already HSA PYDRA level?
My sense is that it should further improve. It should further improve because at present, we are going through a phase wherein we are ramping up various verticals and any ramp up has additional challenges. Finally, when we stabilize, I feel the return ratio would improve.
So when we are touching, say, about 20,000 per term or by 23, 24, Will it be fair to say as written on capital employed probably should be crossing 50%?
It's difficult to put in a number to that. But from a trending level of 30%, it is significantly improved because to define the trajectory and output of that out and put it in number terms is slightly difficult at this stage. But the path in terms of its sales and there will be improvement in the return ratios.
We have the next question from the line of Anil Dha Joshi from ICICI Securities. Please go ahead.
Yes. Many thanks, sir. So I just missed the number regarding the EBITDA margin that you indicated in the new product as well as at the consolidated level? So roughly where do you see the EBITDA margin numbers?
Yes. So in the prescriptive business, it is basically telecom, laptops, the results and all, the EBITDA margins will be in the nature of 2.5% to 3% and depending on how much maintenance of manufacturing we keep in, the margin should improve from there. Overall, completely, Naren, I think so since our growth on our prescription business will be more and as a percentage of overall revenues, the prescription business will contribute more in the future years. So my sense is the margins in a good year can be 3.75% to 4% in an year which has got it factored like the rate this year, I think it will be in the range of 3.5% to 3.75%. Okay.
So, okay. Yes,
that was my question. Thank you.
Thank you. We have the next question from the line of Onsar Gungardee from Street Consultancy. Please go ahead.
Yes. My question was regarding operating leverage, negative operating leverage kicking in. I mean, you had the advantage of CLI scheme. That's why you have significant revenue upside this year. What would have been the case if this were not there?
I mean, significantly, the revenue would have gone down. And again, effectively, your profit would have been much, much lower than this. So what comment do you have to offer on that?
If you look at the quarter one numbers, that significant revenues are coming from LED TV business, where there is no PLI. So almost 68% of the revenues are coming from LED consumer electronics business, so which is there is no clear light. So I actually don't get your question properly.
Your operating negative operating leverage kicking in, it's almost the PAT is at a 4% margin.
So Yes, because if you Yes, because if you Yes. Ultimately, function of your fixed cost, the demand got impacted and it impacted our lighting and washing machine business, which is basically sold offline, but basically sold in the markets and the markets were of course locked down because of the 2nd wave. And there is always a fixed cost that you have created in the business. So that's why the margins have kind of have come down. But yes, with the order book now coming back to normal in July and we have a strong order book overall in Q2 and we'll keep getting better.
So the margins will come back. Yes, we should go back to our normal margins that we guided 3.5% to 3.7%. So please appreciate what Saurabh is sharing. Irrespective of PLI,
lighting, television, washing machine, set top boxes, medical electronics, security thermal and systems and we are also on a significant growth path except for the blip of the last quarter, I think.
Great. So the guidance that you shared for next 2, 3 years, say, 'twenty three, 'twenty four, what kind of EBITDA or PAT margin will you expect?
So we feel that
on a blended basis, it should be somewhere in the range of 3.75% to 4%, 4.5%. That's what we because on the ODM side, we're going to have lighting, we're going to have washing machines, we're going to have a refrigerator and we are also going to have hopefully a small portion of television coming from audience, right? And then we are also going to be investing in the backward integration piece, particularly in PLI and in 'nineteen. So I think that in a blended basis, it should be around 4.5%.
Okay. So 4.5% of EBITDA margin you're expecting?
That's right.
Okay. The last question is on equity raise you have guided for or taken an approval. What's the status on that? And are you comfortable with your net debt levels?
Yes. If you look at the net debt level, we're just talking about INR54 crores in a INR 1,000 crores balance sheet. So we're absolutely comfortable there is no cushion in the balance sheet. The balance sheet is strong and we can easily fund our growth going forward from controlled debt and from our internal accruals. And we've also we expect certain money to also come in from the stock options that we've issued to our employees.
So through a combination of all these three, I think so we should be able to fund our growth, but yes, there are more opportunities that are coming. So that's why because it's more of an enabling provision that we have taken from the growth and we will, of course, get it approved by the shareholders in our upcoming region. But we at least feel confident that it can be submitted from an internal accruals and some form of control debt because the debt to equity ratios are similar to it.
Okay. Thanks a lot. All the best.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. We will now close the question queue. I would like to hand the conference back to the management for closing comments. Please go ahead, sir.
So thank you so much for being with us. And all the guys will be safe. And special thanks to Naval for conducting this conference. Thanks very much again.
Yes. Thank you very much. Thank you, Naval. Thank you.
Thank you, gentlemen. Ladies and gentlemen, on behalf of MK Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.