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.