Dixon Technologies (India) Ltd. share price target

Q2 revenue jumped 133% YoY, driven by Mobile and EMS growth; EBITDA margin slid 30bps on change in business mix

Overall revenue growth of 133% was led by strong performance in mobiles & EMS (235%), home appliances (22%) and Lightning products (29%) division. Operating profits were higher by 114% to Rs 426 crore, with OPM falling 33 bps.

Dixon Technologies’ (DIXON) recent tie-ups and MoU with HP and Asus for the production of PCs, notebooks, and laptops under IT hardware PLI 2.0 augur well for scaling up its IT hardware revenues from current levels.

Q1 revenue jumped 101% YoY, driven by mobile and EMS growth; EBITDA margin slid 20bps on input cost hike

Q4 revenue jumped 52% YoY, driven by mobile and EMS growth; EBITDA margin down 120bps on input cost hike

The management is confident of healthy revenue growth, led by increasing mobile segment demand, new product launches, and new customer additions across segments. We maintain our HOLD rating on the stock.

Q3 revenue up 2x YoY led by robust growth in mobile & EMS segment; EBITDA margin dips 80bps on higher input costs

Takeaways from Q2FY24: (1) improved business visibility in core mobile division; its revenue contribution likely to improve from current ~50% to 60%+ by FY26, (2) aim on expanding margins by attaining operating leverage, better product mix and higher backward integration, (3) steady growth in exports with likely exports of INR 20-25bn in FY24 the as per company.

Q2 sales up 28% YoY led by a 77% upswing in mobiles & EMS business which offset slow lighting sales

We change our stance to HOLD from BUY.

Dixon’s Q1FY24 performance was largely driven by growth in mobile and EMS divisions. Other segments reported revenue decline / flat revenues in line with slowdown in the white goods and durable market in India. Company has added new clients in its mobile business (Itel and Xiaomi).

Q1 topline strong at Rs 32.7bn (+15% YoY) with improved margins; new customer additions provide healthy visibility

While the company has taken the right steps to improve share of ODM, initiated cost saving measures, we believe weaker demand for white goods and durables is likely to impact revenue growth in near term.

Q4 topline of Rs 30.7bn in line with our estimate while improved ODM contribution aided a margin beat

Dixon had earlier guided for FY23E revenues of Rs170bn and has now cut the guidance to ~Rs125bn. We note some of the issues such as reduction in prices of open cells for TV are likely to hurt in coming quarters too. Also slowdown in white goods and durables due to steep inflationary pressures is also likely to impact the production in near term.

Dixon maintained its strong revenue growth trajectory in 2QFY23, led by healthy growth in home appliances (62% YoY) and mobile & EMS (166.4% YoY) segment.