Dixon Technologies (India) Ltd (DIXON) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (DAM Capital Advisors): Ladies and gentlemen, good day, and welcome to Dixon Technologies Q2 FY '27 Earnings Conference Call, hosted by DAM Capital Advisors. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this call is being recorded. I now hand the conference over to Mr. Tanay Shah from DAM Capital Advisors. Thank you, and over to you, sir.
Tanay Shah (DAM Capital Advisors): Thank you. Good evening, everyone, and welcome to Dixon's Q2 FY '27 earnings call. Today, we have with us the management being represented by Mr. Atul Lall, Vice Chairman and Managing Director; and Mr. Saurabh Gupta, Director and Group CFO. At this point, I will hand over the floor to Atul sir for his opening remarks, post which we will open up the floor for Q&A. Thank you, and over to you, sir.
Atul Lall (Dixon Technologies (India) Ltd): Thanks, Tanay. Thank you so much. Good evening, everyone. This is Atul Lall, and joining me today is our Director and Group CFO, Saurabh Gupta.
Saurabh Gupta (Dixon Technologies (India) Ltd): Good evening, everybody.
Atul Lall (Dixon Technologies (India) Ltd): I would like to warmly welcome all our stakeholders to discuss our Q2 performance for financial year 26-27. Key highlights for the quarter are as below. Revenues for the quarter ended September 30th, 2026, was INR21,806 crores. EBITDA, excluding fair value gain on the stake held by Dixon in Aditya Infotech Limited for the quarter, was 609 crores. PAT, after minority interest and excluding fair value gain on the stake held by Dixon in Aditya Infotech Limited for the quarter, was 293 crores. Margins during the quarter were impacted on expiration of mobile PLI-1 scheme, along with elevated global memory prices due to rapid expansion of AI infrastructure. The pass-through of higher input cost through corresponding increasing in selling prices resulted in a lower reported margin percentage, particularly in mobile and IT hardware business, despite the recovery of increased costs through pricing adjustments. Our mobile business has remained resilient, sustaining volumes and broadly stable year-on-year levels,
Atul Lall (Dixon Technologies (India) Ltd): Despite the challenging operating environment, exports volume for our anchor customer is expected to ramp up meaningfully from Q4 with further growth anticipated along with exports of feature phone and smartphones, exports of Transsion Group's brand from the next fiscal. Profitability in washing machine and refrigerator was temporarily affected by fluctuations in polymer prices, rising freight cost and transit time, unfavorable foreign exchange movement, and higher cost of other key inputs. These pressures are expected to ease as cost pass-through initiatives gain traction and operational efficiencies progressively strengthen. During the quarter we also undertook calibrated pricing actions in response to the sharp rise in our input cost. However, with the continued increase in prices, there is always a lag in passing off the same. Near term external headwinds do not alter our medium to long term growth story and we continue to see strong opportunities for increasing localization, deepening of manufacturing, new customer additions, and India's growing position in the global electronics manufacturing ecosystem. Our strategic foray into display modules, camera modules, mechanicals and other critical components represent a significant step in Dixon's evolution from a scaled electronics manufacturing services player to more deeply integrated electronics manufacturing ecosystem. By building capabilities across critical components we aim to enhance domestic value addition, strengthen supply chain resilience, improve cost competitiveness, and deepen customer engagement and progressively unlock opportunities for margin expansion, thereby strengthening Dixon's competitive moat of sustainable growth. Beyond our established business and component integration initiatives, we are actively evaluating opportunities to build a high-end specialized EMS business with focus on high margin, low volume product categories with strong economics and superior margins. One of the strategic areas which is being actively pursued is manufacturing of silicon photonics optical transceivers and advanced packaging capabilities to capture rapidly growing AI infrastructure, hyperscale data centers, telecom sectors, and high speed computing technologies that can transmit increasingly large volume of data with greater bandwidth. As India builds its advanced technology manufacturing ecosystem, Dixon aims to be among the first of the Indian companies to establish capabilities in these segments through strategic acquisitions or partnerships. The initiative would accelerate moving up the technology value chain, expand our presence in higher manufacturing and position us to capture emerging operating opportunities in next generation electronics. And this is also aligned with the government policy framework of ISM 2. Now, I'll share with you the business performance and insights in each of the segments. Mobile and other EMS businesses: revenue for the quarter was ₹20,093 crores with an operating profit of ₹509 crores. Our mobile manufacturing business continues to be a key pillar of Dixon's growth strategy and we remain focused on scaling volumes, strengthening operational efficiencies, and deepening our relationship with leading global and Indian customers. Despite a challenging industry environment with India's smart phone market declining by 26% year-on-year in Q2 FY '26-'27, according to industry reports, Dixon has demonstrated resilience by sustaining its smartphone manufacturing volumes at broadly stable year-on-year levels. This reflects the strength of our customer relationships, execution capabilities, and ability to navigate a volatile demand environment. Exports are poised to become an important incremental growth driver for our mobile business. Export volume for our anchor customer are expected to ramp up meaningfully from Q4 with further growth anticipated along with exports of feature phone and smartphone of Transsion Group brands from the next fiscal. Together these opportunities will drive significant incremental volumes for the next fiscal, improving capacity utilization, operating leverage and a strengthened Dixon's growth trajectory. MPMS, that is Mobile Phone Manufacturing Scheme of the Government of India, presents a significant opportunity for Dixon to accelerate growth by scaling volumes and actively engaging with the existing Indian brands to build long-term manufacturing partnerships to drive incremental volumes, strengthen market position and capture a large share of India's mobile manufacturing opportunity. Consolidation of Vivo operations is expected to commence from Q4
Atul Lall (Dixon Technologies (India) Ltd): significant volumes anticipated for the next financial year. Construction of a 1 million square feet facility in Noida with higher capacities has almost been completed and we expect the operations to commence from Q3 of this fiscal. Longcheer JV is expected to commence operations in Q3 of the current financial year. We're also expo- exploring opportunities to expand the partnership beyond mobile phones into adjacent product categories creating a menu for business diversification and incremental growth. QTech, our 51% subsidiary and an EMS, ECMS beneficiary operates the largest camera manufacturing plant in India. We have already expanded our capacities from 80 million to 120 million annually along with deeper manufacturing, which is a margin accretive and will further expand capacity to 180 to 190 million units annually by next fiscal. The first phase covering automotive and notebook displays is expected to commence trials in Q3 followed by mobile display trials in Q4 with mass production targeted to begin from the next fiscal year. Telecom and Networking Products: Revenues for the quarter was Rs. 1,837 crores. This segment has been scaled meaningfully supported by expanded customer relationships, healthy order book, increasing localization, and sustained investments in telecom infrastructure. While our established portfolio of customer premises equipment, including fixed wireless access devices, broadband equipment, and other networking products continues to provide a strong foundation, we are strategically expanding into more complex, technology-intensive product categories. Production of complex microwave backhaul radios for a large global brand has scaled up successfully and we also expect to export the same during the current fiscal. Additionally, we'll be adding complex optical platforms and industrial radio products to our portfolio starting next fiscal year. We are pursuing a large opportunity to expand our services to an anchor customer and to serve global markets from our facilities in India with products such as optical network terminals, that's ONTs, and optical line terminals, that's OLTs, and actively working on IP acquisition for IPTV set-top boxes in line with our efforts to increase value addition and deepen our role in serving end customers. We are in advanced discussions with tier-one network equipment OEMs to manufacture aggregation routers for India. These are critical 4G to 5G networks connecting cell sites and mobile towers to the core network. Successful execution will not only add high-value telecom products to our portfolio, but also create a pathway to serve global markets. Our joint venture with Gemtek, a Taiwanese ODM, will manufacture [cough] optical transceivers, that's small form-factor pluggable, SFPs, and bidirectional optical sub-assemblies as BOSA with our approved Electronics Component Manufacturing Scheme application. This JV positions us to capture a share of the growing demand in telecom and data center segments and is expected to commence for operations in Q4 of this fiscal. Our anchor role in upcoming telecom manufacturing zone at Gwalior will position us at the center of an end-to-end design, manufacturing and component ecosystem, capitalizing on significant CapEx and OpEx intense incentives to deliver scalable and globally cost-competitive manufacturing. IT Hardware Products: Revenues for the quarter was Rs. 2,160 crores. Dixon's IT hardware vertical is witnessing a very significant growth driven by increasing volumes, deepening customer engagement leading to a strong order pipeline with further expanding the product portfolio into high-end gaming laptops for a global brand. Beyond laptops and all-in-ones in our Chennai facility, we have installed capacities for desktops with production starting in Q3 of this fiscal. We have received a large order for tablets from one of our existing clients' customers under the UP government scheme in a Noida facility. Our new manufacturing facility, adjacent to our current facility in Chennai, for our 60-40 joint venture with Inventec, a corporation from Taiwan, which is one of the world's top five PC ODMs, is expected to start the trials in Q3 of the current fiscal. The order book in this category from our, all our customers looks very healthy and as a result, we're now transitioning from hybrid category with INR 250 crores of CapEx commitment to global category with INR 500 crores CapEx requirement under IT PLI 2 with correspondingly increasing revenue threshold and higher incentives payout.
Atul Lall (Dixon Technologies (India) Ltd): and lead to margin improvement. With the scale and broader product portfolio deeper component localization and access to global technology partners, Dixon is well positioned to build IT hardware into a major growth vertical and progressively develop India as a competitive manufacturing hub. Home appliances. Revenue for the quarter was 586 crores with an operating profit of 48 crores. For semi-automatic washing machine the volume grew by 27% to 6.3 lakh units during the quarter and by 16% year-on-year to 10.9 lakhs for the first half year ended September 2026. For FATL that is fully automatic top loading, the volumes grew by 24% year-on-year to 1.3 lakh units during the quarter and 23% year-on-year to 2.2 lakh units for the half year ended September 26th. The segment continues to deliver a very strong growth supported by capacity expansion, broader product portfolio, in-house molding and tooling capabilities. Investments in backward integration will enhance operating leverage and drive sustained profitability. Having established a strong foothold in semi-auto washing machines and fully automatic top loading washing machines, the company's progressing towards the launch of fully automatic front loading washing machines in Q3 of the current fiscal in Tirupati. We are adding entry into adjacent categories such as dishwashers and microwave ovens which will be launched in Q4 of the current fiscal, creating opportunity to address a wider consumer base. In washing machines, we have established the largest manufacturing capacity in India with an annual capacity of 3 million units for semi-automatic washing machines, .6 million units for fully automatic top loading washing machines, and .3 million units for fully automatic front loading machines. This takes us our total capacity to 3.9 million units against an estimated annual Indian requirement of 12 million units. With capacity equivalent to approximately 33% of the total market, we are well positioned to capitalize on the growing outsourcing opportunity, onboarding new customers and scale volumes across product categories, driving improved capacity utilization and long-term revenue and earning growth. Lighting: The lighting industry has experienced a challenging operating environment with subdued demand and pricing pressures. Despite these headwinds, Dixon lighting business has demonstrated resilience and continue to pursue growth opportunities through product portfolio expansion and customer additions. We're strengthening our presence in the indoor lighting segment by expanding product portfolio and offering a wide range of design-led solutions. We continue to premiumize our product portfolio with multiple launches in COB downlighter categories. In the coming quarter, we'll also be focusing on expanding a range of outdoor lighting portfolio. We are further ramping up our SMT capacity with the new BEE guidelines for self-ballasted lamps and increased customer requirements. We have commenced exports for strip lights to a large US retail chain and expect to secure additional orders across the broad lighting portfolio and are also in discussions with a large German retail chain. Going forward, the company will focus more on premiumization, design and high value-added lighting solutions, while broadening its product offering and customer reach, which will strengthen Dixon's competitive position in the market. Consumer electronics, that is LED TVs and refrigerators: Revenues for the quarter was 1,115 crores with an operating profit of 40 crores. Our LED TV and refrigerator business are operating in a challenging environment characterized by overall softness in consumer demand and inflationary pressures across key input costs. However, we remain focused on expanding our customer base, increasing ODM participation, and strengthening our product portfolio. We believe the current demand is cyclical rather than a structure structural, and Dixon remains well positioned to benefit as industry volumes normalize. LED TVs: demand in value and mid-range remain soft, impacted by sharp input cost inflation driven primarily by global memory supply tightness. However, demand for large screen televisions, that is 50 inches and above, and premium QLED and OLED models remained relatively healthy. We have initiated local mini LED production and plan to transition fully to an ODM model by Q3 of the current fiscal. Based on the customer demand and market feedback, we have also integrated low-cost mainboard support for lightweight operating systems, that is Coolita, OSB, and Thundercloud, into our Q3 product portfolio. Refrigerators: Q2 also saw an uptick in commodity prices and elevated sea freight costs, which necessitated corresponding increase in selling prices, which further weighed on consumer demand and impacted near-term volume growth. Despite an industry-wide decline in direct cool segment, we sustained our volumes with portfolio enhancement and onboarding new brands. For a large brand, now we have started manufacturing side-by-side ref--
Atul Lall (Dixon Technologies (India) Ltd): refrigerators and will start manufacturing multi-door, French door refrigerators from next month. To support future growth, we're expanding our current facility by almost 375,000 square feet, creating capacity for deep freezers, visi coolers, and two-door refrigerators. This expansion will enhance our volume mix and establish a broader, more robust appliance platform over time. Despite the near-term softness, we remain positive on medium to long-term growth prospects for category, supported by low household penetration, deep premiumization, and increasing customer demand. Rexxam Dixon Electronics, our 40/60 ACPC based joint venture with Rexxam continues its strong growth trajectory characterized by robust cash flow generation and an industry-leading ROC profile. Our new facility in Chennai has started commercial production in August 26th with expanded capacities to meet increased demand for our anchor customers. We are in active discussions to onboard couple of large brands. Hearable and wearables, our 50/50 joint venture with Imagine Marketing, boAt, continues to deliver a strong financial performance supported by broad-based revenue growth, healthy cash flow generation, and lean balance sheet. Building on this momentum, the JV has also started manufacturing dashcams, smart watches, power banks, headphones, and exploring other electronic categories. This diversification will improve our capacity utilization and unlock operating leverage. With that, I conclude my remarks and we're both happy to take any questions. Thank you.
Moderator (DAM Capital Advisors): Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Siddhartha Bera from Nomura. Please go ahead.
Siddhartha Bera (Nomura): Yeah. Hi, sir. Thanks for the opportunity and congrats on a good set of numbers. Sir, first question is on the mobile side, so if you can share the volume for the current quarter and how to think about the outlook for the second half, given the weakness in the consumer demand, do would you still maintain, or if you can give some color for the second half? And secondly, is on the export side. I mean, if you also can break it up into what is exports in quarter two and where do you see the outlook for maybe next year?
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