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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.
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