Key highlights from Dixon Technologies India Ltd (DIXON) Q4 FY23 Earnings Concall
Q&A Highlights:
- [00:16:16] Renu Baid from IIFL asked about the guidance for mobile segment in FY24-35. Atul Lall MD said mobile is going to be the largest figure and the company is concluding two of the largest brands in India. Manufacturing for these brands will start by mid-3Q and large revenue is expected from them. The govt. guideline for ’23 and ’24 is INR6,000 crores and the company is confident in meeting and exceeding this amount.
- [00:18:29] Renu Baid at IIFL enquired about the incentive income booked in FY23 across key verticals and in total. Saurabh Gupta CFO said incentives have been booked across 2 PLIs, mobile and telecom. The share of revenues for FY ’22, ’23 for mobile is around INR 9-9.5 crores and for the telecom PLI JV with RP Group is around INR 2.5-3 crores.
- [00:20:10] Renu Baid at IIFL queried about the margin for consumer electricals television in FY24 given the strong margins this quarter and the increased ODM mix in revenue vs. FY23. Atul Lall MD said a large part of television segment revenues is coming from the ODM stream and margins are expected to hover between 3.5-4%.
- [00:21:11] Ankur from HDFC Life asked about client’s views about the demand for durables such as TV, lighting, and home appliances and the order book look for next 6 months. Atul Lall MD replied that the order book is mixed with some businesses being flattish and others being strong. Demand in consumer electronics and lighting is slightly flattish but showing positivity in the last 2 weeks. The order book for mobile, telecom devices, wearables and hearables is very healthy with new customer acquisitions and larger share of wallet from existing customers.
- [00:23:42] Ankur from HDFC Life enquired about washing machine growth. Atul Lall MD replied that the company has grown from 1.1 million to 1.5 million in semiautomatic washing machines and from practically nothing to 1.6 lakh in fully automatic top loading. This year, the internal plan is to grow to 1.75 million and 250,000 respectively with an aggressive growth plan.
- [00:24:30] Ankur from HDFC Life asked about the overall sales and margin guidance for FY24. Atul Lall MD answered that DIXON cannot give specific number, but assure that the growth is going to be much ahead of the industry.
- [00:35:10] Aditya Bhartia at Investec asked how large the Jio phone contract is and its plans on that front. . Atul Lall MD said the company has started manufacturing 4G phones for Jio in the current month with a healthy order book of almost 1 million units or 0.5 million units a month.
- [00:36:29] Abhishek Ghosh from DSP enquired about the volume growth of television segment and the share of ODM over the next 12-18 months. Atul Lall MD replied that the company’s television numbers grew from 2.9 million to 3.4 million in the last fiscal, a 15% growth despite the industry not growing. The internal budget for the current fiscal is around 3.8 million, a growth of around 10%. ODM is going to be almost 45- 50%.
- [00:42:27] Dhruv Jain from Ambit Capital asked about the capex for FY24 and FY25. Saurabh Gupta CFO answered that for FY24 it’s going to be around INR400 crores.
- [00:44:39] Dhananjai Bagrodia from ASK asked if it’s fair to assume that the decline in other expenses as a percentage of sales will remain steady or is there scope for more improvement. Saurabh Gupta CFO replied that all expenses, including employee expenses, other expenses, depreciation and finance costs as a percentage of revenue will keep coming down due to significant operating leverage benefits in some verticals and overall reflection in the financial year.
- [00:47:49] Dhananjai Bagrodia from ASK enquired if the 5.1% OPM in 4Q on the higher side and is 4.2-4.3% sustainable for FY ’24/’25. Saurabh Gupta CFO said that margins increased to 3.6% in ’21-’22 due to supply chain and commodity price impacts which have now settled. With benefits of operating leverage, migration to ODM and backward integration, margins have expanded to 4.3% with a possible range of 4.2-4.5% for FY24.
- [00:50:00] Dhananjai Bagrodia from ASK asked about the margin for the other business ex-mobiles. Saurabh Gupta CFO replied that the margin profile for other businesses would be better than mobile with an average margin of 4.1% and upwards of 4.5% in other businesses.
- [00:52:49] Pulkit Patni from Goldman Sachs enquired about the current landscape of mobile EMS in India, including the status of Wistron and Apple’s business, and plans of Chinese companies. Atul Lall MD said DIXON believes that Apple is the flag bearer of mobile growth in India and that there is a large opportunity for Indian manufacturers to partner with Apple. Also more and more Chinese brands are looking at outsourcing, which could lead to India becoming an exporter of mobile phones.