Emkay Global Financial's research report on Dixon Technologies
Dixon’s Q3 revenue grew 117% YoY to Rs104.5bn (down 9% QoQ, on seasonality), with margin stable QoQ at 3.7%; growth continued to be led by the Mobile & EMS segment (84% of 9M sales), with segment margin up by ~20bps QoQ. Backed by its strong order book, Dixon expects near-double smartphone volume at ~60mn units in FY27E vs ~30mn in FY25E which would thus address ~60-65% of the outsourced opportunity; ramp up from IT Hardware (targets ~Rs25-30bn sales next year vs near-zero now, despite 1Y imports extension) and Telecom products (~4x growth this year to Rs30bn, ~2x in FY26E) is also on track. In addition to its display modules foray and attempts underway to foray into precision parts, camera modules and battery packs, Dixon is now evaluating display fabs (semiconductor parts) which, despite heavy capex, feature strong double-digit margin with return ratios at par with current level (after the expected capital subsidies, per the ISM 1.0 policy).
Outlook
Dixon expects 100-120bps mobile margin rise over 24-36M even without the PLI benefit and despite any possible competition. Our thesis on Dixon remains on track (refer to IC Further legs to growth story); we raise FY26E/27E EPS ~4.5%/6.5% on faster growth (FY25E EPS cut ~1% on higher minority interest); retain BUY; up our TP to Rs 21,100.
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