DIXON TECHNOLOGIES

Electronics power behind big brands

Noida-headquartered Dixon Technologies is an In dian multinational engaged in the manufacture of electronics products. Incorporated in 1993, the company has emerged as an undisputed leader in the outsourced electronics manu facturing services (EMS) industry and a supplier to various multinational and domestic compa nies in India. The company operates in both original equipment manufac turing (OEM) and original design manufacturing (ODM).

Originally started to manufacture colour television sets, the company today is active in six business seg ments: (1) consumer electronics, mainly televisions; (2) lighting solu tions, mainly LED lights; (3) home appliances, mainly washing machines; (4) mobiles and EMS; (5) security devices, mainly CCTVs and DVRs, and (6) reverse logistics.

The company enjoys a leadership position with a 40 per cent marketshare in LED TVs and 50 per cent in the lighting segment in India, based on capacity. In home appli ances, its marketshare is 9 per cent and around 12 per cent in mobiles.

Dixon boasts of marquee clients, including global mul tinationals like Samsung, Xiaomi, Motorola, Panasonic and Philips. At home, its major clients include Voltas, Beko, Havells, Lloyd, Bajaj Electricals and Crompton.

SALES BOOM

The company has made rapid strides on the financial front. During the last 12 years, its sales turnover has ex panded by over 20 times from Rs 767 crore in fiscal 2013 to Rs 17,691 crore in fiscal 2024, with operating profit shoot ing up by over 33 times from Rs 21 crore to Rs 705 crore and the profit at net level skyrocketing 125 times from Rs 3 crore to Rs 375 crore. Prospects for the company are all the more promising, going ahead. Consider:

• The emergent domestic EMS industry, valued at around $ 25 billion, is heading for rapid growth. According to experts, the Indian EMS segment is expected to grow at a CAGR of 45 per cent over the next five years to emerge as a $ 150 billion industry.
• The ‘China +1’ strat egy being adopted by global multi nationals, along with various gov ernment measures, will help boost the domestic EMS industry going forward, and Dixon, being one of the undisputed leaders in the seg ment but having less than a 5 per cent marketshare, is bound to benefit substantially. The company’s manufacturing capacity in LED TVs, washing machines and LED lighting can serve 26 per cent, 28 per cent and 45 per cent of total domestic requirements (in vol ume terms) respectively.
• Domestic mobile production is set to grow at least five times to cross over 1 million crore by fiscal 2026, ac cording to experts. This domestic mobile production is un der the government’s PLI (production linked incentives) scheme and the company has started reaping the benefits from last year. During the next three years, its mobile pro duction is expected to grow multifold – at least 14 to 15 times. Dixon has now applied for PLI in lighting, electronic wearables and other electronic products like laptops and notebooks. This opens up a significant growth opportunity for Dixon going forward.

TARIFF-FREE

• US President Donald Trump is all set to impose reciprocal tariffs. Though India will be hard hit in the case of several industry segments like steel, textile and agricul tural produce, the country will benefit a lot as far as the electronics industry goes. These tariff changes may take place at a time when the electronics sector is seeing rapid growth, with India’s electron ics exports to the US surging consider ably in recent years. In fact, India’s elec tronics exports to the US have grown substantially from $ 2.5 billion in fis cal 2020 to approximately $ 11 billion in the fiscal 2024. While smartphones, especially Apple products, make up about 50 per cent of these exports, India still accounts for only 2 per cent of total US electronics imports. Accord ing to Nomura analysts, China and Mexico contribute 35 per cent and 22 per cent respectively to US electronics imports. India’s position is improving due to its gradual reduction of import duties on components such as printed circuit boards and assemblies, cameras and displays. This is in stark contrast to the US, where there is no import duty on most electronics, giving India a competitive advantage in manufac turing and export potential.
• Referring to the company’s bold but high-stakes entry into display fabrication, Kotak Institutional Equities notes, “Dixon is positioning itself as India’s first mover in display manufac turing, planning to set up a $ 2.7 billion display fab that will cater to 20-25 per cent of India’s total demand and fully meet its internal requirements.” Kotak expects the facility to achieve steady state operations in four years, deliver ing 19 per cent ROCE. Kotak values Dixon’s display fab business at Rs 1,540 per share, based on a 74% stake for Dixon, 26% for its tech nology partner, a 3-year set-up period, 0.7x asset turnover, a 20 per cent stable state EBITDA margin, and a 1.5 per cent terminal growth rate. This raises Dixon’s overall valuation to Rs 14,770 per share.
• All the existing verticals of the company are doing very well and it has now forayed into new verticals through various joint ventures under the PLI scheme. The company has joined hands with Japan-based Rexxam to take up manufacture of printed circuit boards– the joint venture is operational now and has strong revenue potential. In the mobile phone segment, it is going to add one more client apart from Motorola, Nokia and Samsung. With a view to driving future revenue growth, it is planning to enter new segments like refrigerators, electronic and IT products, telecom products and AC components.

SAMSUNG ORDERS

• In the case of mobile phones, Dixon’s order book for Samsung smartphones has already increased to 1.5 million/month and could grow to 1.7 million/month. In order to meet this increased demand, the company has acquired a 0.2 million sq ft facility in Noida. In the case of home appliances, the company has ramped up the ca pacity for washing machines, mainly the semi-automatic category, to 2.4 million units in Dehradun. In the light ing division, it plans to invest Rs 100 crore over five years to ramp up the lighting business. Further, in security systems, capacity has been ramped up from 10 million units per year to 14 million units. The company's subsidiary Ismartu India Pvt. Ltd. (IIPL) has recently signed a binding MoU with KHY Electronic In dia Pvt. Ltd. (KYH) to acquire land and buildings, machinery and other tangible assets from KHY for an amount of upto Rs. 133 crore. This will enhance manu facturing capacity of IIPL. Dixon Electro Manufacturing (DEM), the company's wholly owned subsidiary has signed MoU with Cellecor Gadgets (Cellecor) for manu facturing refrigerators and its related components for Cellecor, which is a lead ing name in the consumer electronics industry. By this partnership, DEM will increase its customer base in refrigera tor segment. Interestingly, Cellecor also offers a diverse range of products like mobile phones, Smart TVs, soundbars, smartwatches, kitchen-home appliances like washing machine, air conditioners, air coolers, geysers, heaters etc. Hence, going forward, the company might get an opportunity to cater other products also in addition to refrigerators. The company is also in discussion for partnership for manufacturing indus trial, institution and automotive dis plays. In the first year itself, Dixon has captured around 8% of the Indian mar ket in direct cool categories and also started exports to Nepal and actively exploring Sri Lanka and UAE markets. Further, manufacturing capacity expan sion is also being planned from 1.2 million to 1.5 million per annum. Si multaneously, the plans are underway to broad base product portfolio in this particular segment by adding deep freez ers, visi coolers, wine chillers and 2 door frost-free refrigerators. Prospects for Dixon going ahead are all the more promising, as the In dian EMS industry is on the growth path and is expected to grow at a CAGR of 45 per cent over the next five years to emerge as a $ 162 billion industry. The ‘China+one’ strategy by various global multinationals and dis tinct government measures like ‘Make in India’, ‘Atmanirbhar Bharat’ and ‘PLI’ will help boost the domestic EMS industry. The company’s share price has re cently declined from Rs 19,150 to Rs 13,065 in the wake of the current bear ish phase. Its shares may decline fur ther if market sentiment remain nervous. But long-term prospects for the scrip are highly bullish.

PERFORMANCE INDICATORS (Rs. in crore)