Dixon Technologies India Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from Dixon Technologies India Ltd (DIXON) Q3 FY24 Earnings Concall

• Financial Performance
  • Consolidated Q3 revenues up 100% YoY to INR 4,821 crores.
  • Consolidated Q3 EBITDA grew 64% YoY to INR 187 crores.
  • Consolidated Q3 PAT increased 87% YoY to INR 97 crores.
  • Weakness in chemicals and packaging films segments.
  • ROCE expanded to 35.6% as of Dec 2023.
  • ROI also improved to 25.6% as of Dec 2023.
  • Expect further improvement in upcoming quarters driven by earnings growth.
• Capacity Expansion and Working Capital
  • Continuing investments to augment capacities across products and diversifying into new product categories.
  • Strong capital allocation discipline and working capital management.
  • Helped drive higher asset turns in mobile and IT hardware verticals.
  • Will further boost margins and return ratios going forward.
• Mobile Phones Business
  • Manufactured 11 million smartphones and 26 million feature phones in 9M FY2024.
  • Added capacities across 4 plants to support 30 million smartphones and 50 million feature phones.
  • Signed deals with 2 large global brands, production starting in next 2-6 months.
  • New Indian brand trials starting Feb-March, production from April.
  • Global brand production to commence in 4-5 months.
  • Significant ramp-up underway for Xiaomi, Motorola, with high exports.
• Consumer Electronics
  • Launched India’s first Google TV and partnered Samsung for Tizen OS.
  • Entered interactive flat panels; higher margins than LED TVs.
  • Undertaking backward integration – started injection molding and LED bar manufacturing.
• Lighting Business
  • Revenues declined due to price erosion from new energy-efficient products.
  • Professional lighting launch planned in Q4 FY2024.
  • Backward integration of mechanicals to start in Q1 FY2025.
  • Price erosion seen earlier has bottomed out now.
  • Consumer demand continues to remain subdued.
  • Launching new professional and industrial lighting solutions from Q4.
  • Export opportunities being explored but revenues will take time.
• Laptops and Tablets
  • Dixon subsidiary Padget approved under PLI scheme 2 with INR 250 crores investment planned.
  • Finalized manufacturing partnership with Lenovo; tablets production starts in Q4.
• Mobile Phone Capacity Expansion
  • Currently 30 million smartphones capacity across 3 Noida plants.
  • Also constructing 860,000 sq ft facility in Noida; 2-2.5 years to complete.
  • This will support expected growth from notebooks, tablets under PLI scheme.
  • To be largest contributor to overall growth going forward.
  • Aim to capture 35-40% share of India’s smartphone market of 150mn+ units.
  • Significantly tapping outsourcing opportunity from brands.
• Non-mobile Segments Performance
  • Most segments grew YoY except lighting.
  • LED TVs – 8% value growth but volume declined.
  • Semi-automatic washing machines – 35% growth.
  • Hearables and wearables – 22% growth.
  • Seasonality impact in Q3 with inventory buildup ahead of Diwali.
• Industrial Electronics EMS
  • Currently building capabilities and targeting global markets.
  • Can leverage existing SMT lines initially for production.
  • Need 6-8 months for dedicated cleanrooms when volumes pickup.
• Xiaomi Ramp-up Timelines
  • Product approvals received for initial models, production started.
  • Further models pipeline established, approvals in couple of months.
  • Gradual month-on-month increase expected from Mar-Apr.
• IT Hardware Segments Ramp-up
  • Tablets commercial production starts in couple of months.
  • Notebooks production from Aug-Sep; complex line, still ramping up.
• Capex Outlook
  • INR 440 crores incurred year-to-date.
  • Around INR 200 crores additional spend expected this fiscal.
  • Next fiscal capex also similar range of INR 400 crores plus.
• Motorola Exports Opportunity
  • Currently manufacture 22% of Motorola’s global volumes in India.
  • Aims to increase it to 30% in coming quarters.
  • Dixon does 15% of Motorola’s global volumes, to raise it to 18-20%.
  • Allocation between factories depends on commercials, capabilities.