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.