Categories Concall Highlights, Earnings, Technology

Dixon Technologies India Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Dixon Technologies India Ltd (DIXON) Q2 FY24 Earnings Concall

  • Financial Performance
    • Consolidated revenues grew 28% year-over-year to INR4,943 crores in Q2 FY24.
    • Consolidated EBITDA grew 37% to INR200 crores and PAT grew 47% to INR113 crores in Q2 FY24.
    • Expanded ROC to 32.9% and ROE to 24.4% as of Sept 2023 through earnings improvement and working capital management.
  • Business Segment Growth
    • Consumer electronics revenues were down 4% YoY to INR1,440 crores.
    • Mobile & EMS revenues grew 77% YoY to INR2,819 crores driven by orders from Jio, Motorola, Nokia.
    • Home appliances revenues grew to INR364 crores through new products and backward integration.
    • Wearables revenues strong at INR385 crores with healthy order book.
  • Strategic Partnerships and New Businesses
    • Entered into key partnerships with Google for ODM TVs, Samsung for Tizen OS TVs.
    • Started manufacturing smartphones for Xiaomi in new Noida facility.
    • Secured large order from Reliance Jio for 4G Jio Bharat phones.
    • Forayed into manufacturing laptops, tablets and exploring new categories.
  • Investments in Capacity Expansion
    • Expanded capacities across businesses like mobile phones, security systems, telecom products.
    • Investing INR150 crores for laptop & tablet manufacturing under PLI scheme.
    • Added capacity for manufacturing refrigerators, expected to start production by Q4 FY24.
  • Mobile Business Growth
    • Mobile segment is seeing sharp acceleration this quarter due to domestic demand and new customer acquisitions like Xiaomi and itel.
    • Commercial production for Xiaomi smartphones will start next month. Further growth expected from Nokia feature phone exports.
    • Dixon is in discussions with a couple of other large global brands which could get finalized in the next quarter.
    • Mobile expected to contribute 60-70% of revenues over next few years.
    • Looking to add new domestic and global mobile brands, starting with domestic market.
  • Lighting Business Challenges
    • LED bulb business declined due to overall market shrinkage and some loss in market share.
    • However, Dixon has grown in other lighting categories like battens, ceiling lights, down lighters.
    • Main reason for LED bulb decline is the fall in overall volume and lower unit value.
  • Consumer Electronics Outlook
    • Marginal growth expected in consumer electronics this fiscal closing at 3.6-3.7 million units versus 3.4 million last year.
    • Backward integration initiatives like injection molding plant and LED bulb manufacturing will add cost benefits.
  • Strategic Priorities
    • Dixon wants to expand in higher margin products and components manufacturing.
    • Dixon’s large customer base in electronics generates cash for new investments.
    • Will look beyond consumer electronics for new growth engines in EMS segment.
  • CapEx and Investments
    • Spent INR331 crores CapEx till September, expected INR500 crores for current fiscal.
    • Intensity likely lower next year, still budgeting and awaiting some approvals.
    • Exploring new businesses with higher margins despite some impact on return ratios.
  • Working Capital Changes
    • Increase in Q2 due to business ramp-ups and seasonal factors.
    • Confident of generating 300 crores over next 3-4 months through improved working capital management.
    • No structural change in working capital cycle expected.
  • Mobile Phone Manufacturing
    • Dixon started manufacturing for Xiaomi smartphones which will ramp up from next month.
    • Also started manufacturing for TECNO’s smartphone brand itel which will scale up in coming quarters.
    • Currently have capacity to manufacture 2.5 million smartphones and 5.5-6 million feature phones per month.
  • Expansion in Product Portfolio
    • Started manufacturing LED TVs for Nokia, in addition to existing client Motorola.
    • Setup facility to manufacture refrigerators with capacity of 1.2 million units per year.
    • Production trials underway, expect commercial production to start in Q4FY24.

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