Dixon Tech: A flurry of acquisitions, collaborations, and capacity expansions
Source: Live Mint
Shares of Dixon Technologies (India) Ltd fell a sharp 15% on Tuesday, a day after the company announced impressive December quarter (Q3FY25) results. Revenue soared 117% and Ebitda climbed 112% year-on-year during the quarter. The sharp decline in stock price appears to be a result of profit booking, as the stock had rallied by a similar magnitude in the week preceding the results.
Revenue growth for the mobile phone manufacturing company was fuelled by customer additions and higher realizations, driven by an increasing share of 5G phones. The mobiles and EMS (electronics manufacturing services) segment, which accounts for 89% of Dixon’s total revenue, surged 190%, bolstered by the integration of Ismartu, acquired in April.
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Dixon is gaining traction through onboarding of new customers and implementing backward integration initiatives supported by the government’s production-linked incentives (PLI) scheme. The company booked ₹200 crore as incentives for 9MFY25, accounting for about 20% of its Ebitda. It has partnered with a global entity to establish a display module assembly facility, set to commence production in Q2FY26, which will also benefit from the PLI scheme.
A big-ticket development is Dixon’s proposed entry into display fabrication. This initiative, however, hinges on receiving approval under the Indian Semiconductor Mission 2.0. If approved, the company would be eligible for a subsidy covering nearly 70% of the ₹25,000 crore capex being provided by central and state governments. This facility would mark a critical backward integration step, with displays accounting for 60% of TV production costs and 12-15% for mobiles and laptops.
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Dixon has also made strides in manufacturing for global brands. Production for Google Pixel has begun, and a joint venture with Vivo was announced in December. Last week, the company acquired a new facility in Noida, boosting its total smartphone production capacity to 60 million units. Additionally, its Chennai laptop facility has started manufacturing for Acer and Lenovo, with trial runs for two other customers expected this quarter.
The potential gains from the initiatives are hard to miss. According to a 20 January JM Financial Institutional Securities report, the company is projected to record Ebitda growth of 59% CAGR during FY24-27, driven by strong growth in the mobiles business and backward integration initiatives.
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Over the past year, the stock has gained approximately 160%, trading at a premium valuation of 78x FY26 estimated earnings, according to Bloomberg data. The consumer appliances segment remains a weak spot due to subdued demand. “The ability to execute an asset-heavy venture with a long gestation period and different RoCE profile holds the key for Dixon,” noted Kotak Institutional Equities.
