Dixon Technologies (India) Ltd
NSE:DIXON
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Dixon Technologies (India) Ltd
Earnings Call Analysis
Q1-2025 Analysis
Dixon Technologies (India) Ltd
Dixon Technologies began the fiscal year with significant growth, showcasing consolidated revenues of INR 6,588 crores for Q1 FY '25. This represented a remarkable increase of 101% from the previous year’s INR 3,274 crores. Consolidated EBITDA grew by 90% to INR 256 crores, and consolidated PAT surged by 109% to INR 140 crores. The company successfully managed its working capital and expanded its ROCE to 38.4% and ROE to 27%, further strengthening its balance sheet.
The Mobile and EMS division was a standout performer this quarter. The division’s revenues skyrocketed by 189% year-on-year to INR 5,192 crores. Operating profit also saw substantial growth, increasing by 223% to INR 171 crores, with an operating profit margin of 3.3%. The division's ROCE expanded significantly to 69%, up from 32% a year ago. This growth was driven by a strong order book and incremental investments.
Dixon's various verticals displayed robust performances. Revenues for consumer electronics were INR 855 crores with a 3.4% operating profit margin. Home appliances reported revenues of INR 305 crores, growing 18% year-on-year, driven by the upcoming washing machine season, though the margins slightly compressed due to freight cost increases. Lighting revenues reached INR 227 crores, with telecom and networking products contributing INR 418 crores. Laptops and IT hardware segments also saw positive developments with new contracts from Lenovo and Acer.
Dixon continued to focus on enhancing its operational efficiency through backward integration. The company announced the commencement of backward integration processes and plans for further investments in injection molding and extrusion for better cost optimization and competitive strength. The launch of high-value premium products in the lighting segment and enhancement in telecom and networking product capacities were also highlighted.
Dixon discussed the acquisition of Ismartu, receiving approval from the Competition Commission of India. This acquisition is expected to add a capacity of 10 to 12 million smartphones, bolstering Dixon’s position in the mobile manufacturing market. The company is also planning to deepen its manufacturing capabilities by partnering with technology providers for display modules and other precision components.
Although Dixon refrained from giving explicit guidance for FY '25 revenue and EBITDA, the management expressed confidence in maintaining aggressive growth. It mentioned potential growth rates in several segments, especially mobiles and IT hardware, and highlighted expected margins around the 4% level. Capital expenditure is projected to be around INR 500 to 600 crores for the year.
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Ladies and gentlemen, good day, and welcome to the Dixon Technologies Q1 FY '25 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors Limited. Thank you, and over to you, ma'am.
Yes. Good evening, everyone. A warm welcome to the Q1 FY '25 earnings call of Dixon Technologies. We have with us the management today being represented by Mr. Atul Lall, Managing Director and Vice Chairman; and Mr. Saurabh Gupta, Chief Financial Officer.
I now hand over the floor to Mr. Atul Lall for his opening remarks, post which we'll open up the floor for Q&A. Thank you, and over to you, sir.
Thanks very much, Bhoomika. Good evening, ladies and gentlemen. This is Atul Lall, and we have on the call today our CFO, Saurabh.
Good evening, everyone.
Thank you very much for joining this earnings call for the quarter ended June '24. We are pleased to have commenced the year on a strong note.
First, coming to our overall performance for the first quarter. Consolidated revenues for the quarter ended June 30, 2024, was INR 6,588 crores against INR 3,274 crores in the same period last year, which is a growth of 101%. Consolidated EBITDA for the quarter was INR 256 crores against INR 135 crores in the same period last year, which is a growth of 90%. Consolidated PAT for the quarter was INR 140 crores against INR 67 crores in the same period last year, which is a growth of 109%.
With earnings improvement and effective working capital management, we were able to expand the ROCE and ROE to 38.4% and 27%, respectively, as on 30th June, '24, with further strengthening of the balance sheet and gross debt-to-EBITDA ratio of 0.1% and cash conversion cycle of negative 7 days. We continue to invest in our capacities and diversify into new product categories to support long-term growth opportunities with huge focus on quality, manufacturing excellence and consistently meeting the needs of our principal customers and strengthen our position as a key player in the industry.
We are well poised to capture the upcoming opportunities and be a part of India's long-term growth story and to write the country's robust consumption narrative and Make in India initiative to achieve industry-leading growth.
Now I'll share with you the performance and the strategy in each of the segments going forward.
Mobile and the EMS division, revenues for the quarter were INR 5,192 crores, growth of 189% year-on-year. Operating profit was INR 171 crores, which is a growth of 223% year-on-year with an operating profit margin of 3.3%. The ROCE in this business has expanded to 69% in the end of June '24 as against 32% a year ago.
We are continuously meeting the incremental investments in order to meet the strong order book from other customers -- from our customers. Now we have created a capacity of 45 million in smartphones and another 10 million to 12 million is going to be added after Ismartu acquisition, which is around 55% to 60% of the opportunity pool in this business. Further, we have a capacity of 40 million feature phones, which is again almost 65% to 70% of the capacity required for the feature phone in this country.
There is strong growth in volume for Motorola smartphones and monthly order book of almost 9 lakhs to 10 lakhs per month, including decent order book on exports.
Xiaomi business has also now ramped up, and now we are clocking around 7 lakhs per month from July and higher volumes are expected in coming months of the festive season.
Manufacturing for another global brand through Compal is expected by September '24.
With Longcheer as our ODM partner, we're already clocking around 4 lakhs to 4.5 lakhs volumes with a substantial uptick, which I think will go up to almost 7 lakhs a month going forward.
We are expecting to add one more large global brands in the coming months. On the Ismartu deal, we have received the approval of the Competition Commission of India in this month, and we will start consolidating those financials, I think, in the next 4 to 7 days for the completion of CPs.
In line with our strategy and once we acquire at large scale, the next phase is going to be deepening of manufacturing, wherein we have finalized a technology partner for display modules in [ HDC ], and we expect to start the manufacturing in the next fiscal. We are also looking at getting into precision components and mechanical and various other modules.
Our endeavor is to deepen the value addition to be a part of a significant part of non-semiconductor bomb of mobile and IT products, which is going to be more margin accretive and create a moat around business. Please appreciate we'll have the largest capacity in the country. We'll have all the banks who are the largest in the country in the Android ecosystem. And the focus then is to deepen the value addition, which we feel we now have the financial bandwidth and also we're in the process of acquiring technical bandwidth on our own and also through partnership route to create a huge moat for us in this business.
Next, vertical of Consumer Electronics. Revenues for the quarter were INR 855 crores with operating profit and margin of INR 29 crores and 3.4%, respectively. Manufacturing under partnership with Samsung for their Tizen operating system is already rolled out from Q1 of current fiscal. Our first ODM-based Google TV solutions from 32 inches to 85 inches were rolled out in Q4 of last fiscal. It has met with an encouraging response from our customers.
In addition to our existing product portfolio, we have added interactive flat panel display and also digital signages to our TV product portfolio. These are the solution from 65 inches to 100 inches. The order book in both these categories look decent. We are also actively looking into exploring for partnership for manufacturing of industrial, institution and automotive displays.
Home appliances, revenues for the quarter were INR 305 crores, a growth of 18% year-on-year, operating profit of INR 32 crores, a growth of 14% year-on-year. In line with our backward integration strategy, our tool room is now fully operational, and most of the tools are being manufactured in-house. Our infrastructure footprint in Tirupati and Dehradun are now NABL compliant and accredited, which is strengthening our competence and reliability for decent relationships with our customers. We have a very, very healthy order book, and we are targeting a significant double-digit growth in this business.
Lighting, revenue for the quarter was INR 227 crores with an operating profit of INR 15 crores. Both revenues and operating profits have grown quarter-on-quarter despite continued challenges with the pricing pressures and weak consumer demand, we expect the momentum to continue in Q2.
Post the launch of professional cities last quarter, we further increased the basket by extending into the DOB range of floodlights and street lights, which is expected to be rolled out by Q2. We have started the backward integration process and the injection molding for ceiling lights and extrusion for backing is planned in the coming quarters to achieve better cost of optimization and acquire a larger competitive strength. We are working towards expanding our product basket by moving to high-value premium products that is high-voltage [indiscernible] downlighters.
The next vertical is telecom and networking products, revenues in this segment for the quarter and the year-end review was INR 418 crores with a steep growth. We're enhancing our capacities and have 1 more facility in Noida to meet the increased demand for our customers. We have started mass production of 5G fixed wireless access devices along with access point GPON, ONTs and Internet setup boxes. We have started manufacturing 5G fixed wireless access devices, both ODUs and IDUs for both domestic market for Nokia, and we have a healthy order book.
Laptops and IT hardware products. We have already finalized contracts with Lenovo and Acer. We are already manufacturing for Acer. And we started the NPI process for Lenovo notebooks and the mass production for Lenovo will commence in Q3 of this fiscal.
We have also got 2 new customers, which are largest global brands for notebooks. We're in the process of signing the definitive agreements. We target to start production for these 2 global brands in Q1 of next fiscal. With this, 4 customers -- with us, we have the top 4 customers out of top 5 global brands operating in the country. For this, a new campus is being planned in Chennai, the site has been identified. The resource has been acquired, and we target to start with Chennai facility in the next 8 to 10 months.
So this is also going to be a very significant engine of our growth in the coming years. What we, as a team, have been successfully been able to execute on the mobile front, we aspire to do the same in the IT products.
Wearables and hearables, revenue for the segment were INR 143 crores for the quarter with healthy operating margins and high ROCE. We have a decent order book in this business.
Security surveillance system. We have sold our 50% stake in AIL Dixon to our JV partner Aditya Infotech. And in return, we are taking a 6.5% stake in Aditya Infotech, which will be going for IPO. Aditya Infotech is a highly profitable company, and we'll be going for an IPO by Q4 of this fiscal or Q1 of next fiscal. This entity will increasingly focus on more backward integration and designing, and we feel that this relationship is going to be hugely value accretive for your company.
Rexxam Dixon Electronic Private Limited, it's a 40-60 JV with Japanese company, Rexxam to manufacture inverter controller board for air conditioners. This JV achieved a revenue of INR 114 crores in this quarter with healthy operating margins and very strong ROCE. We have an extremely healthy order book in this business. We're exploring the possibility to accrue more investments under the recently announced revised scheme of PLI for white goods by DPIIT.
Refrigerators, the team has done an amazing job. We have an extremely healthy order book. We are clocking production of almost 80,000 refrigerators a month, which is 80%, 85% of our capacity. So the project has taken off very well. Now we are planning another capacity expansion because the order book seems to be significantly increasing.
Also, we are expanding our product portfolio by adding 100 liters category to the product portfolio, and we are also exploring investment for frost-free. We have backwardly integrated many production processes and will be further investing towards injection modeling.
So that's what I wanted to share. I would like to stop here and me and Saurabh are there to address your questions.
[Operator Instructions] The first question is from the line of [indiscernible] from Unicorn assets.
Great set of numbers, many, many congratulations for that. Firstly, on the EMS side, so other EMS, which you were saying in the Chennai plant, is it related to the IT hardware I'm expecting? Is it the same?
That's right.
Okay. So I heard in the TV interview, you were -- around INR 4,000 crores, we are expecting revenue from it in the, I think, next fiscal, not this one. Just wanted to understand what's the total opportunity size and how much of that are we willing to grab? And how are we looking for the capacity size to build up in the next -- not this fiscal, but next 2 fiscals FY '27?
So the Chennai plant should be operational, I think, by Q4 of current fiscal or Q1 of next fiscal. The first phase of acquiring large global brands with our customers has already been achieved. See, the addressable market for IT products is almost $10 billion, INR 80,000 crores with the production value is around INR 50, 000 crores.
We aspire and that's what we submitted to the government, almost INR 47,000, INR 48,000 crores of revenue in 6 years. So it's going to take some time. But finally, I feel that on an annualized basis, to start with around INR 3,500 crores, INR 4,000 crores and then it will ramp up.
Okay. Perfect. So you didn't answer the capacity side we are trying to build and how much time will it take and what would the CapEx we are looking for that?
So initially, the capacity is going to be almost 1.5 million units per year. And the CapEx, the plant is going to be somewhere in the range of around INR 150 crores.
Okay. And what's the -- like total -- so you mentioned about INR 45,000 crores addressable market, which we are looking to grab. What the capacity -- What's the number of units would be for that?
So finally, you're starting with 1.5 million. It's going to be taken up to 3 million, 3.5 million. Let's see how the business pans out. Initial phase is going to be 1.5 million. But I think in a couple of days, that will double it.
Okay. Great. And on the -- you mentioned in the starting statement that 55 million to 60 million units of the phones, that is including Samsung or excluding Samsung?
Excluding Samsung...
So this is excluding Samsung, which is basically everything, including the new Ismartu acquisition that we did. So 45 million, excluding Samsung and 10 million gets added on account of the Ismartu acquisition.
Okay. So 55 million for the non-Samsung and something about 10 million to 15 million would be Samsung in the smartphones space, totally?
Samsung is around 10 million to 12 million...
And lastly, on the...
Sir, could you please fall back in the question queue for further questions. [Operator Instructions]
The next question is from the line of Deepak Krishnan from Kotak Institutional Equities.
Yes. Just wanted to understand if there is any PLI incentive or any amount booked in the mobile segment in this particular quarter. And if there was a similar amount last year as well?
So last year it was -- yes, for this quarter, we had booked almost INR 40-odd crores as PLI incentive for mobile business segment.
Sure. And same number last year?
You mean to say same number exactly in the same quarter last year.
Yes, yes.
My sense it could be a smaller number because clearly, Xiaomi, Oppo, Realme have come in much later, and Motorola numbers have also expanded, but probably it should be -- it would be something around INR 4 crores, INR 5 crores, maybe last year. I can separately tell you that number. I don't have that number right now with me.
Sure. That should be totally fine. Just I wanted to understand production numbers this particular quarter across brands in the mobile segment, if you can kind of highlight -- to whatever details you can kind of highlight. And we get a potential that we will have to revise up our 25 million to 30 million number that we have for the full year?
No, I think it's not possible and prudent just now to give the customer-wise and manufacture numbers...
What I can give you is the focused smartphone numbers.
Sure. That also works. Yes. Smartphone numbers, yes.
That should give you probably a run rate for what we are talking about for the entire year. Yes, so smartphones we did almost -- so between -- excluding Samsung, we did almost 41 lakhs, 4.1 million and Samsung was around 11-odd million -- sorry, 1.1 million.
And feature phones?
It was around 6.6 million.
The next question is from the line of Natasha Jain from Nirmal Bang.
My first question is on the Home Appliance segment. We've registered a strong top line of approximately 18%. I understand this could be the primary order booking for the upcoming washing machine season. What I don't understand is why are we flat at margin level? Is there a steep competition even here? Is there ASP compression happening. And if so, can you call out in which category is it? Is it in the front-load, top-load or semi-automatic. First question is that.
Natasha, if you see the reduction in margin is 0.4%. It has gone down from 11% last year to 10.6% in the current quarter. And quarter-on-quarter, if you see there's an expansion of 0.4%. Now the reason there has been this margin compression is because of the freight increases. The sea freight increases because of Red Sea crisis. And there is some time taken for passing on any increase to the customer. In any case, it's not very significant. This is a part of normal business. So we are in the range of 10.5%, 11%, and that's where we have been.
Understood, sir. Sir, my second question is on the Lighting segment. Now while I understand there's been value compression happening in this segment, we've been of the commentary that we've been making premium lights or lights more in terms of value accretive. So I'm just wondering when is that expected to flow through in our margin for license?
So a lot of operational corrections and also expansion of product mix has already happened. We have, to a large extent, restructured the business. We have optimized our cost structures, and we have invested in the backward integration.
We are further going to invest in polymer processing both on injection molding side and extrusion side is going to be operative in a quarter or so. The professional lighting products like floodlights have already been -- and panel lights have already been rolled out. The street lights that are going to be rolled out very shortly. So all that is happening. Now is it going to be usually margin accretive. No, it's going to be a correction on a positive side. So that's the way this business is going to pan out.
Understood, sir. And sir, just one last question, if I may. We recently heard the commentary that basic custom duty on mobile phone has been reduced. Sir, just want to understand how does this impact you and other EMS players? And what would be the rationale of reducing the custom duty on fully assembled mobile phones? That's it.
So that, please appreciate the seasonal imports of mobile phones is miniscule. If my numbers are correct, the total imports in an INR 3-lakh crore market is barely [ INR 78,000 ] crores. So I think the government wants to send a message globally because there has been some kind of observations from the context and that the custom duty structures in India should be rationalized. So it's in that direction.
Now is it going to impact anything on the manufacturing ecosystem, mobile phones in India, we have a huge conviction, no. There is already a significant arbitrage plus there is a PLI benefit. So no brand, which is manufacturing in India. And I think 97%, 98% of the mobile sold in India are manufactured in India is going to take any decision which is a reverse of this local manufacturing. So on the ground, there is no impact.
The next question is from the line of Bhoomika Nair from DAM Capital Advisors.
Sir, just wanted to understand in terms of our backward integration on our display modules, we were looking to commission the plant by the year-end of 25 million capacity. A, is that on track? And how do you expect -- for the first year of operation, which is FY '26, how will it scale up? What kind of revenues and margins we can possibly see on that? And how do we expect further backward integration in this space?
So the project teams, Bhoomika, are working on it. The project plans are being laid out. The talent acquisition is happening. Site hunting is still happening because it's a complex site plan. But we are still trying our best and that sometime in end of this fiscal or Q1 of the next fiscal, we should start rolling out the production.
In Phase 1, it's going to be 2 million units a month. We have founded our customers, and they're open to it. In fact, they are extremely positive for this local manufacturing because it's save for them the inventory cost. And also there are certain cost advantages. The numbers are being done. Now what is going to be the first year revenue, that is slightly difficult to state because the approvals, these are complex technical approval by each brand, they're going to take some time.
But from year 2, it's going to be a good, extremely good, margin accretive project let me assure you on that. So this is on the display modules, Bhoomika. On the other side, we are working very hard. And we are in advanced stages of discussions through collaborative partnerships and we are exploring to get into the non-semiconductor side of the mobile components. And that's also going to encompass the IT products.
So here, we are exploring various components, and we're in advanced stage of discussions or collaborate from partners who are large globally. This is on the mechanical components. This is on the [indiscernible]. This is the precision components. This is also for flexible PCBs, connectors and cables and various modules.
So this is a basket of products. Please appreciate the balance sheet is strong. And we feel that now we have the financial bandwidth to explore this project. And the financial metrics of this project is different, but definitely, the margin profile is of a different order. So that's what we are working on.
Sure. So sir, with this, what is our current value addition? And where do you see yourself with these various collaborations to broadly get to in a period of, say, 3 to 4 years?
So we feel that -- please appreciate mobile assembly mobile manufacturing, it's a low-margin business. But it's an extremely high ROCE business. It's an extremely high asset to turnover business. Whereas when you venture into the component space, it's much more margin accretive, but the asset to turnover are relatively lower.
So we want to get into a right kind of a blend. Please give us some time to come back to you exactly with the blueprint that how it's going to pan out. What I'm sharing with you that the statically, this is the direction in which we are moving. And we are moving at a very fast pace.
Sure, sir. Sir, just one last thing on -- in terms of Xiaomi and also Ismartu. You spoke about the volume scale up out here with Xiaomi at about 0.7 million per month right now. How do you see that scaling up over the next couple of quarters as also for Ismartu?
So I feel this 0.7 million should start getting 0.9 million or something like that. Let's see how the market pans out and post the value how it pans out. But we're going to have a very large share of their volume. I'm referring to Xiaomi. And when we talk about Ismartu, their current volumes are around 0.7 million of smartphones. Yes, that is going to get consolidated in our numbers once the acquisition is concluded, which hopefully, is going to happen in the next 7 to 10 days.
The next question is from the line of Aditya Bhartia from Investec.
My first question is on the Consumer Electronics segment. If we exclude the refrigerated revenues, it appears that TV revenues have fallen by 18%, 19% this quarter versus the same quarter last year. What would that be on account of?
And also a related question on margins in the refrigerator business. Given that it's an ODM business with significant growth -- significant CapEx, we were anticipating quite high margins in this product category. But it seems at least for the first quarter, which may be because of [indiscernible] issues, those margins haven't really come through. So if you could just explain how exactly we should be thinking on that front?
So Aditya, on the LED TV side, the market has been extremely slow. And there is a decline in volume. There is a decline in volume by almost 17%. That's being reflected in the Q1 numbers.
As far as the refrigerator is concerned, it's only in the ramp-up phase. The initial ramp-up cost has went into these numbers. But finally, the numbers which have been earlier on the sharing, the operating margins are going to be in the range of around 8% to 9%.
Understood, sir. And as we are moving towards the peak season for TV, are you seeing order book looking a lot better?
So I'll say the current month, we want to close it around 250,000. August order book looks very good. It would be around 400,000. And we feel that September also is going to be 400,000, 450,000. So 1 million.
Understood. And sir, my second question is on Mobile phone PLI scheme, given that the current scheme is going to end in almost 2 years, how are you seeing the landscape changing post that? Are you anticipating another incentive scheme from the government side maybe to incentivize domestic manufacturing on the component side?
So Aditya, mobile manufacturing has been extremely successful for the country, for the government. We feel that the government will keep supporting the mobile manufacturing in the country. But the [ avatar ], the scheme is going to change. Now this is my understanding. And they're going to incentivize more valuation addition.
They're going to incentivize the component manufacturing because we have been interfacing with the government and industry association side. And that is what the talks have been. So post '26, when this scheme goes away, probably replaced by a scheme focusing on value addition and components. And strategically, that's what we're trying to do in Dixon, that we are strategizing and we are deeply getting involved with the component ecosystem.
The next question is from the line of Dhruv Jain from Ambit Capital.
Sir, I have 2 questions. So one question was on the mobile phone export side. So if you could just tell us what is the contribution of exports in this quarter -- how do you see it panning out over the next 2 or 3 years? So domestic, you've been fairly successful. So how are you thinking about mobile phone exports in the next 2 or 3 years, apart from the [ tooling ] customers? Any color that you can give there.
So at present, Dhruv, the mobile phone exports is largely for Motorola. We feel that almost 25% to 30% of Motorola production is going to be for global markets. And that's a significant jump. For the other brands, as of now, it's for domestic market. But for certain entities that we have acquired or in the process of acquiring, we're working deeply with our partners to look at export opportunities. However, it's, I think, premature and I'm not able to share with you any tangible numbers. So as of now, mobile exports is confined to Motorola.
The next question is from the line of Indrajit Agarwal from CLSA.
Two questions. First, on mobile phone. As you mentioned, you will be doing somewhere close to 25 million to 30 million assets this year, and maybe that number grows much faster next year. Post that, where do you see this number evolving? And what are the growth opportunity we have because we are already working with some of the top brands? Do you see this business saturating for us?
So we feel that some -- we should be in the next couple of years, reaching around 45 million to 50 million units.
We also feel that there are going to be some breakthroughs for global markets, which is going to increase the volumes. Then the growth engine is going to come through participation in the component ecosystem. And then a significant driver of our revenues, we are working upon for the IT products as a segment. So in this particular domain, these are the growth drivers.
Sure. That is helpful. Secondly, on IT products, is there any delay that we are facing in having the products rolled out because if I recall earlier, our target was tablets by April and laptops by September. So we are now hearing more like third quarter of this fiscal. I understand these are small [ keeping ] issues. But are there any bigger concerns that is there in this business?
So laptop production is already on the trials and also the commercial production to Motorola tablet has already been done. And the NPI for Lenovo has started, and we see the commercial production will start by Q3. The 2 new accounts that we have acquired, we're targeting for one account in Q4 of this fiscal and another account will get productionized in Q1 of next fiscal. So there might be some small delays here and there, but it's largely for the production plan.
Sure. And one last question, if I may. Any progress on the industrial EMS front?
So industrial EMS footprint is going to be again in the Chennai campus. We are in advanced stages of discussions with a very large semiconductor equipment brand, global brand for servicing with requirements of PCBA and also certain mechanical products. We hope it fructifies and we are also in advanced stages with one partner for automotive electronics. So they are progressing well, but we are new to this domain. So it's going to take time.
The next question is from the line of [ Ankur ] from Shri Investments.
Yes. My question was in last year's ...
-- I'm not able to hear you. There is there's some echo in your voice.
Sir, could you please use your headset? Mr. Ankur?
Is it clear now, sir?
Yes, better.
Yes. In last year's AGM, the company has made a statement to enter into several other categories, including EVs and other 3, 4 categories. So I mean, just now you mentioned in 2 years from now, other categories would be the growth drivers for the company. So where are we in terms of that?
So as I shared with you that we are making an attempt for both industrial electronics and automotive electronics. We are seeing traction. That's what we are working on. We also appreciate that in the last 2 years, the very many, many product clients. We have added hearables and wearables. We've added telecom devices. In telecom devices, we have got routers.
We got fixed wireless devices. We've got Android set-top boxes. We have made very large investments in creating capacity for refrigerators. And now we are looking at IT products and very significant investments are going to be made in the component sector for electronics in the [ non-native ] side. So there is already a lot on our plate.
Does that answer your question?
Yes, partially, yes. But I mean, only the time will tell, right? I mean every quarter, it will be given on that. So that for the time being that is fine. Yes. The second question is on an overall scheme of things in the overall revenue of Dixon. I mean, in a couple of years of time, overall, the component ecosystem, how much it can contribute to the overall revenue of production? I mean, how big is the portion?
It's too early to share this number.
Okay. But I mean you can just give directionally how big the opportunity is that's it. Not any specific.
It's too early to share those numbers, please.
The next question is from the line of Madhav from Fidelity.
I had 2 questions. The first one was on the part where you spoke about the partnership that we can have with the automotive electronics side, is that for PCBA essentially or for any of the type of products today?
Sorry, I'm not able to make out your question. Can you be more clear? So automotive is largely for automotive electronics, so PCB assembly, electronic module.
PCBA assembly. Okay. Got it. Understood. And the second question I had was that given that exports is like, say, medium-term growth driver for the company from a mobile phones perspective. What kind of value addition is required to be done in India before we sort of as a company or as the country become competitive to export some of the smartphones in the export markets? Like is there any -- how do we kind of look at that entire construct, that would be helpful to understand.
So we feel that once the component ecosystem is being created in India, India is going to keep on acquiring the competitive strength. And that would help in becoming globally competitive. So I think that journey has already started. We are a couple of years away where India is going to stand on its own feet to compete in the global market. And the Indian solutions -- Indian manufacturing of the smartphones would be servicing the global market.
The next question is from the line of Aniruddha Joshi from ICICI Securities.
Yes. Sir, we have seen historically after Q1 results, you also tend to give a guidance for the full year coming. And with so many moving parts, also so many new businesses, which are expected to undergo changes for a start, will you indicate any guidance for FY '25 in revenue as well as EBITDA?
So we have not been giving guidance now for those 2 years.
Too many moving parts. So how should we look at the overall growth rate, et cetera?
Sir, please appreciate the growth rate is going to be extremely aggressive, but we are resisting from giving any guidance.
You can make out certain numbers that last year, basically the largest opportunity of a larger growth driver for us is mobiles. And then next few years driving IT hardware. So we have given you visibility on the kind of potential numbers we have done in Q1 and some kind of potential number that we will do for smartphones this year. And you can look at those numbers and compare it with the last year numbers. So you can have -- you can arrive at some kind of numbers for yourself.
Okay, sure. And margin-wise, also? Or I mean somewhere around.
Margin, it will be, of course -- Margin will be somewhere around 4-odd percent level. It's in the similar range 3.9%, 4% kind of level.
Understood. And anything on the CapEx for this year?
Yes. So CapEx, I think for last year, we did almost INR 550 crores. We expect a similar run rate of INR INR 550, anywhere between INR 500 crores to INR 600 odd crores a year.
The next question is from the line of [ Vitra Srivastav ] from InCred Research.
Yes. Just 2 questions. So first, on the telecom business. So like the 2 major players, Nokia and Ericsson, what they are saying in their con call is that they'll be focusing more of their energy on chip design and will be outsourcing the manufacturing part. And currently in India, a lot of 5G devices which Nokia itself is being imported from China. So how do you see this opportunity developing? I mean you already have a foot in the door with Nokia. So do you see this becoming big in the coming years? Any thoughts on this?
So we have now a very large relationship with Nokia. -- for the telecom devices side. This is confined to start with the CPE products. When I'm referring to CPE, it's basically routers and fixed-wireless devices. The business is scaling up. This is the first level of relationship. However, the Nokia as of now, we don't have any relationship on the networking equipment side -- yes.
Right. Fair point. Sir, second question on the component part, which you're discussing. So -- if you look a bit into technicality, a significant part of the component is the chip, right? I mean, the chip is the main cost of the BOM bill of material. And the fab in India is still coming. I mean, obviously, the government has given order to Tata, but that will still take some time. So don't you think that the fab -- the foundries have to come to India first before this ecosystem picks up for components? Or is my understanding incorrect?
No. Please appreciate the semiconductor contribution to the BOM is 50% to 55% in mobile phone. The balance 50% is a non-semiconductor part, which considers some mechanical displays, modules, PCBs, connectors. That's a very large portion. And that is more doable right? And that's where we want to participate. Say that even in China, the large contribution to the value addition is coming from the non-semiconductor side.
Fair point. Noted. Just last question, sir. So this mobile and the TV space -- durable space, I mean, the industry as a whole is not growing for the last 3 years. I mean, if you look at the TV volume and mobile volume as a whole, the industry is not growing. I mean although it is very small small -- relatively smaller market for the mobile space. So do you see this -- how do see the industry evolving? I mean the volume level growth is not happening. So do you see that will change in the coming years? Or does the extent we look for diversification in the coming years to counter that?
So in Dixon because we are only a B2B company, in any category, our growth comes in from 3 elements: One, of course, is the industry growth [ is going ] and then we are a part of that growth story. The second growth is coming that if you acquire more and more customers. And that is what we are trying to pursue, and that's what's leading to volatility in our mobile domain. The third is that if we are able to get the larger share of the customer's volatility.
So across all our categories, and all the more in mobile because there's the largest opportunity pool for us. And that's what we are trying to pursue. I think we have been fairly fine or successful in that front. So that's how our growth is coming. And that's what we'll keep on pursuing.
The next question is from the line of Arpit Shah from Stallion Asset.
I just wanted to know what was the consolidated profit number for Ismartu in FY '24?
Yes. So at did almost INR 8,200 crores of revenues at -- and INR 320 crores, INR 325 crores of EBITDA. And a PAT of probably -- a PBT of INR 280-odd crores and a PAT of around INR 240-odd crores.
Okay. And what kind of growth are you expecting from Ismartu in FY '25 and '26?
So I think the first objective for us is to close the transaction, which we should be able to do in the next 7 days. The launch is how the CPGs need to be concluded. And then both of us will sit together and make a plan for this financial year. So we will have a better visibility. But probably, we can assume that they typically sell almost on an average around 1.2 million future [ ports ] a month and 0.7 billion to 0.8 billion kind of a smartphone per month. So that should be the run rate for the balance part of the financial year as well.
And you will be consolidating about 8 months of numbers for the company for FY '25?
That's right. That's right. That's right. It will happen...
Yes, depending on what period it closes in August, yes, but probably anywhere [indiscernible].
The next question is from the line of Girish, an Individual Investor.
Sir Girish from Morgan Stanley. I have a few questions on the mobile component business that you are exploring through, obviously, it's an exploratory stage right now. Just wanted to understand what could be the typical asset turns that you could have in that part? Because I would imagine that it may not be the 10x number that you see right now in the EMS part because we see PCBA probably being below 2x. So if you probably clarify on that. And typically, I know it blended number may not be possible, but what is the range of EBITDA margins also here that is possible?
So Girish, one venture in component side, we have already -- we have already taken a leap and that's the display module. So in that case, the EBITDA margins are significantly higher, and they are in double digits, mid-double digits and also the asset turns are higher. When we are looking at the mechanical component side, asset turnover are going to be somewhere in the range of 1:3 to 1:4. And EBITDA margins are going to be closer to almost double digit, and that's the financial metrics. The other components that I mentioned, the financial metrics are still being studied.
Okay. And then in terms of just one clarification, if I may ask, the mobile scheme obviously will end in the next couple of years. So are you likely to see that mobile component scheme gets introduced just prior to this scheme ending? Or is it like in the next few months because there's a lot of media articles which suggests that the component scheme on mobile might be announced in the immediate distant future?
So any color that you can -- based on your feedback that you've had in the industry? Can you share what would be the typical time line and effectiveness of that scheme. Would it be effective next year? Or will it be after 2 years where it might be introduced just prior to the mobile scheme getting completed?
It's very difficult to say that when the scheme is going to be rolled out and when it's going to be effective. But from the industry side, we are deeply interfacing with the government. And they are extremely receptive to roll out the package for component industry. What time line is very difficult to say, but I think it should happen in 9 to 12 months, something like -- I feel it should happen if it is rolled out, very difficult to confirm. But if it is rolled out, it's going to happen before the culmination of the PLI scheme for mobile, which happens in March '26.
And last clarification, if I may ask, the display module part. Obviously, you have a JV partner. For the other components, would the same method be applied in terms of getting into a JV or there could be some technology fee arrangement also for a [indiscernible] like if you can directionally say what could be the possibilities here?
At present we are looking at [ D2D ] participation. [indiscernible] If it is a JV partnership then it is a concern only.
The next question is from the line of [ Kunjal ], an Individual Investor.
Congratulations for a great set of numbers. So my question is if you compare the Indian manufacturing -- Indian mobile manufacturing sector. And if you compare it with China, what is the percentage cost difference, if I may ask?
See, you have to declutter this question into different layers. When you look at the cost of manufacturing, the cost of manufacturing in India will be -- I feel more efficient. But when you look at on a holistic basis, because of the lack of component ecosystem, those are the disabilities which come into the picture. So I reiterate that per se manufacturing cost in India with the kind of the line application...
So on the component side, like what would be the different like 2% or lesser?
That is difficult to place a number where I think it's going to be 4% to 5%.
The next question is from the line of [ Sanedhya ] from Unicorn assets.
Sir, just a follow-up. So one on the Motorola side. So you said that almost 30% would be going to the U.S. market of the total Motorola production that we are doing. Is there any risk of new import restrictions or anything if there is any kind of government change in the U.S. or anything. I just want you to understand the kind of agreement we have with Motorola that.
So Motorola is really pushing for exports from India for North America, for U.S. As of now, it looks good because we have optimized various execution capabilities for into cost structure, which has made it more attractive for them. Now is there going to be any change because the evolving geopolitical situation, I assume you are referring to the presidential elections and all. I don't think so. I think the day it's emerging, evolving, it's going to be only better.
Yes. We feel it will be only better for India and for the mobile industry.
Okay. And lastly, on the inventor control board for air conditioners. So what's the revenue for this quarter, I mean profitability, some kind of number you want to give for the whole year, maybe, if not that. And since we are looking for manufacturing for [ ICBs ] for Daikin, are you also looking to getting into some kind of partnership to manufacture the AC completely or maybe some other components and anything else on AC front? ODM or AC?
So this is a joint venture between Dixon and Rexxam. We have 40%, they have 60% and completely Daikin-centric business. In this quarter, we have done around INR 140-odd crores. This is INR 350 crores, INR 400 crores in business, profitable, highly and a very high ROCE. And we are exploring the possibility of starting exports of inverter controller boards from India to Daikin where it's global entities. Let's see how it pans out. We're also working with the JV partner for making more investments and capacity expansion. Under the extended PLI scheme for white goods. So that's it. Now are we planning to enter some other AC components? No, not as of now.
And AC manufacturing as a whole?
No, no, we're not looking at it.
The next question is from the line of Abhishek from DSP Mutual Funds.
Could you share the volume..
I'm sorry to interrupt, sir. Mr. Abhishek, your volume is very low.
Is it better now?
Yes, sir, better.
Yes. Sir, if you can help us with the volumes for washing machine, lighting and the television part of it for the quarter?
Yes, Abhishek. So LED TV, we sold about 5.9 lakhs; washing machine, semi-automatic was around 4.3 lakhs; fully automatic was INR 0.5 lakh. And on the lighting side, we sold almost 3 crore LED bulbs and 60 lakh battens; and 29 lakh downlighters.
Okay. So your growth in washing machine is fairly decent from that perspective.
Yes, it has grown by 10% in volumes on semi-automatic and fully automatic. Of course, we have different numbers.
Okay. And is this volume growth what you have seen in nonmobile part of the business, that is likely to be a trend going forward as far as volumes are concerned.
So washing machine as a category because a large part of the growth will come from fully automated. So as a category, we expect double-digit growth in that category. So semi-automatic will grow at low double digit, but the fully automatic will grow at a much faster pace. Combined, both put together a high double-digit kind of.
Okay. And just one last question on the competitive landscape. Any change that you see in the lighting competitive landscape? I know you have introduced many new products and other things. But from a core lighting perspective, any change in the competitive landscape?
So we feel that the competitive intensity, which has become a bit too intense is kind of stabilizing and the prices are also stabilizing. So is there a significant upturn in the business? I would say we are moving step by step together. So the business is going through a consolidation thing, and we as a company have completely restructured the business. We have restructured our product portfolio, our cost structures. And we are also seeing some kind of stabilization in the pricing front. So that's where we are.
In Q-on-Q, you see, Abhisehk, the numbers have grown by 15%. So clearly, we see that the worst is behind us as far as the pricing is concerned, the component intensity is concerned. So it can only get better from here. if not better, at least, we should maintain the standard run rate.
The next question is from the line of Nirransh Jain from BNP Paribas.
Congrats on a good set of numbers. Sir, I just have one question on Nokia, on the mobile phone side. So as far as my understanding is that we are currently -- Dixon is mainly manufacturing feature phones for them. But recently, HMD has also announced that they are looking to double their exports from India and like Dixon being the key partner of them. So I was just wondering, so do we have any export opportunity immediately from the Nokia front? Like you mentioned that currently, you have a visibility only from the Motorola but not from the other brands. I just wanted to check on that.
So we are doing 100% of -- not 100%, we are doing almost 95%, 96% of what Nokia sells in India, been both on feature phones and smartphones. In fact, 100% of their smartphone, both on the Nokia brand and HMD are done by us. We're already manufacturing for exports for them. Exports has already started under the Nokia brand. And we have had deliberations and discussions with Nokia. And we'll be expanding capacity for Nokia for doing their exports from India.
Okay. Sir, just a follow-up on that, how much of the volume of smartphones are we doing right now for Nokia?
It's a relatively a small number.
Yes. So it's a small number. In the first quarter, it was only 10,000, 11,000 kind of quantity. But on the feature phone side, Yes, we did almost 2.6 million, which includes exports one.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to Ms. Boomika Nair for the closing comments.
Yes. Thank you very much, sir, for giving us an opportunity to host the call. Wish you all very best, and thanks to all the participants for being on the call. Thank you very much. And any closing remarks from your side, sir?
No, thanks very much, Bhoomika. And I really want to thank all the participants and our stakeholders, we from Dixon absolutely committed to create value fee. Thanks so much for having faith us, really appreciated. Thanks so much.
Thank you so much. Thank you.
On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.