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Informist, Monday, Jan. 20, 2025

 

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--Dixon Tech: Diversified revenue stream protected from segmental volatility 
--Dixon Tech: Orderbook looks healthy for coming months 
--CONTEXT: Dixon Tech management's comments in post-earnings conference call 
--Dixon Tech: Captured 8% of the Indian direct cool category market 
--Dixon Tech: Oct-Dec mobile phone volumes 8.3 mln, including Ismartu India 
--Dixon Tech: Fabrication unit for mobiles, TVs needs capex of $3 bln 
--Dixon Tech: Large part of fabrication unit capex may be subsidised by govt 
--Dixon Tech: Fabrication unit to have a gestation period of 3 years 
--Dixon Tech: Govt support must for fabrication unit project to take off 
--Dixon Tech: See FY25 capex INR 8 bln; FY26 capex may be similar to FY25 
--Dixon Tech: See display fabrication unit revenue potential up to $2 bln 
--Dixon Tech: Display fabrication unit could clock double-digit margin 
--Dixon Tech: Looking for partners in backward integration projects 
--Dixon Tech:Expect mobile segment margins to grow 100 bps over 24-36 months 
--Dixon Tech: Ismartu India Oct-Dec revenue INR 19 bln

 

By Steffy Maria Paul and Sunil Raghu 

 

MUMBAI – Dixon Technologies (India) Ltd. is in talks with a global technology partner to set up a display fabrication unit for mobiles, televisions, laptops, and tablets that could cost up to $3 billion, the company's management said in an analyst call held after the December quarter earnings were detailed. Of the $3 billion that the project would require in capital expenditure, the majority would have to come in as government subsidies. The unit has the potential to generate up to $2 billion in revenues and double-digit margins. The gestation period for setting up this project will be three years, the company said.

 

Dixon Technologies has pencilled in a capital expenditure of INR 8 billion during the current financial year and expects a similar capex figure for the next financial year as well. The company is also looking to invest in other backward integration projects for precision components, mechanicals, cameras, and modules. The company expects these projects to be margin accretive. In the next 24 to 36 months, the company expects its margins in the mobile segment to expand by almost 100 basis points on account of this backward integration.

 

In the past few months, Dixon has focused on signing pacts with multiple companies to manufacture and supply electronic devices. These include partnerships with Cellecor Gadgets Ltd. to manufacture refrigerators, a joint venture with Vivo Mobile India Pvt. Ltd. to make electronic devices as an original equipment manufacturer, and with Compal Smart Device India Pvt. Ltd. to mass produce Google Pixel smartphones. The company in August had also acquired a 50.10% stake in Ismartu India Pvt. Ltd., a firm manufacturing electronics and mobile devices. The revenue from Ismartu India for the quarter was INR 19 billion. This was the first quarter that the subsidiary became fully consolidated with the company.

 

Dixon Technologies is also in talks with a "large global" original equipment manufacturer to form a joint venture for information technology products. The company said it has finalised the location to manufacture display modules with HKC Corp. and expects to start the manufacturing from the end of the June quarter of the next financial year or from the September quarter. The order book for the March quarter and for the current and next financial year looks healthy, the company said.

 

Within the first year of operation, the company has gained around 8% market share in its direct cool category and has also started exporting to Nepal. The company is also exploring the Sri Lanka and UAE markets. The company is also looking to expand the capacity to 1.5 million per annum from 1.2 million per annum. The company will expand its product portfolio by including deep freezers and wine chillers, Dixon Technologies said. 

 

The company's smartphone volumes for the quarter were 8.3 million, including the Ismartu India integration. For the nine months ended December, the volumes were 20.5 million. The company plans to export 3 million phones starting next month and expects this to generate a revenue of INR 15 billion-INR 18 billion. The company's volumes in the television segment for the quarter were 380,000 and were impacted by subdued demand, the company said.  

 

The company said that its production-linked incentives for the mobile segment have been cleared till the December quarter and that of its telecommunication segment has been cleared till the last financial year. For the lighting and air conditioner components segment, the company expects to receive production-linked incentives for the previous financial year in the March quarter. The company said it has accounted for around INR 2 billion from the production-linked incentive scheme in the nine months ended December. 

 

The company said its diversified revenue streams insulated it from segmental volatility, and added that despite a challenging macro-environment, it was able to deliver robust performance during the quarter. Dixon Technologies' consolidated net profit for the December quarter rose 77.3% on year to INR 1.71 billion, lower than analysts' estimate of INR 1.95 billion. The company's consolidated revenue for the quarter rose nearly 117% on year to INR 104.54 billion, beating expectations of INR 96.78 billion by a wide margin.

 

On Monday, shares of the company closed at INR 17,559.45 on the National Stock Exchange, up 2%. The company detailed its earnings for the December quarter after market hours.  End

 

Edited by Deepshikha Bhardwaj

 

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