Dixon Technologies (India) Ltd.'s June-quarter earnings left brokerages divided on the electronics manufacturer's outlook after revenue beat estimates but EBITDA, margins and profit fell short. Nomura and Macquarie retained their positive ratings, citing improving visibility from the Vivo joint venture, exports and component manufacturing, while Goldman Sachs and CLSA remained cautious on valuations and the pace of margin recovery.
Brokerages largely attributed the margin contraction to the quarter being the first without smartphone PLI support, along with input cost inflation and higher memory prices that pushed up handset realisations without a corresponding improvement in profitability. Analysts expect margins to remain under pressure in the near term, with the benefits of backward integration and potential PLI 2.0 incentives likely to emerge later.
Dixon maintained its FY27 mobile volume guidance despite a 22% decline in mobile volumes during the quarter. The company expects the Vivo joint venture to start contributing from the third quarter, while potential export orders from two anchor customers could provide another growth lever.
Dixon Technologies Q1 Highlights (Consolidated, YoY)
- Revenue rose 21% to Rs. 15,548 crore from Rs. 12,836 crore. (Estimate: Rs. 14,339 crore)
- EBITDA declined 4.1% to Rs. 463 crore from Rs. 483 crore. (Estimate: Rs. 480 crore)
- EBITDA margin contracted to 3% from 3.8% a year earlier. (Estimate: 3.3%)
- Net profit stood at Rs. 218 crore versus Rs. 225 crore a year earlier. (Estimate: Rs. 231 crore)
- Net profit excludes the fair-value gain on Aditya Vision and non-controlling interest.
Mobile volumes declined 22% year on year, while operating profit from the business fell 6%. Management maintained FY27 volume guidance at 32-33 million units excluding Vivo and guided for first-half volumes of 16.5 million units.
The Vivo joint venture is expected to start contributing from Q3 FY27. Management also said two anchor customers could potentially help Dixon target exports of 15-20 million units.
Here's what brokerages are saying after Dixon Technologies announced Q1 results:
Macquarie
- Maintained 'Outperform'; Target Price At Rs. 16,000
- Margin compression reflected the first quarter without PLI support and general input cost inflation.
- Higher average selling prices largely covered increased costs, resulting in an optical contraction in margins.
- Details of PLI 2.0 are expected within weeks and could apply retrospectively from April, making it a key margin catalyst.
- Laptop and server scale-up should support the earnings outlook.
- Q-Tek ramp-up is also expected to aid margins going forward.
Goldman Sachs
- Maintained 'Sell'; Target Price Raised To Rs. 10,980 From Rs. 10,025
- Margin pressure reflected the first quarter without PLI benefits and higher smartphone average selling prices.
- Vivo joint venture received approval in July, with production expected to begin by Q3 FY27.
- MPMS scheme could support export volumes, but margins are unlikely to return to historical levels.
- Backward integration into components should improve profitability, although benefits are expected with a lag.
- Stock trades at 57 times revised FY28 estimated EPS.
- Sees the current risk-reward as unfavourable.
CLSA
- Maintained 'Underperform'; Target Price Raised To Rs. 10,600 From Rs. 10,400
- Margin contraction was driven by the expiry of PLI benefits and higher memory prices, which increased realisations.
- FY27 smartphone volume guidance implies a challenging growth requirement in the second half.
- Expects growth to decelerate as Dixon's smartphone market share approaches a peak.
- Company is exploring new opportunities in precision manufacturing and servers.
- PLI 2.0 and backward integration are expected to support margins meaningfully only from FY28.
- Valuation at 52 times FY28 estimated earnings remains demanding.
Nomura
- Maintained 'Buy'; Target Price Raised To Rs. 17,086 From Rs. 13,813
- Revenue beat estimates on stronger realisations, while EBITDA margin was slightly below expectations.
- Approvals for Vivo, Longcheer and components are now largely in place, improving growth visibility.
- Camera module ramp-up and display manufacturing are expected to begin from Q4 FY27.
- Two anchor customers could help Dixon target exports of 15-20 million units.
- Expects margins to remain range-bound in the near term.
- Full benefits from component manufacturing are expected to become visible only in FY28.
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