Dixon expects recovery in FY24 despite global slowdown fears

Following dented sales in the third quarter, Dixon Technologies Ltd. expects a recovery in the next quarter and even the next fiscal. But research firm Jefferies has a cautious outlook.

“We are in the process of adding new customers, we have gotten some new export orders from the UAE, and we also have repeat export orders,” Saurabh Gupta, chief financial officer at Dixon Technologies, told BQPrime’s Niraj Shah.

He added that the company is building a team for research and development to develop solutions and is also looking to get into new product portfolios.

Meanwhile, Jefferies, in a note, pencilled in lower sales expectations at Rs 18,700 crore, compared to the company’s estimate of Rs 19,000–21,000 crore in FY24.

Dixon is involved in business-to-business contract manufacturing and is largely dependent on orders or offtake from brand owners, it said, adding that the subdued demand environment impacted LED TVs and Lighting segments the most–a year-on-year decline of 39%. Even Mobile’s revenue was down year-on-year.

Gupta said the company and its contract partners witnessed lower exports on the back of a global slowdown, while domestic sales have already started to pick up in the current quarter.

“There will be a 25–30% sequential growth in mobile sales in the fourth quarter,” he noted. The company is also closing two accounts for mobile sales in the domestic market that can double the mobile revenues in the next fiscal, taking them to nearly Rs 8,000 crore.

However, Jefferies is factoring in lower segmental sales of Rs 6,500 crore in FY24.

Jefferies has a ‘Buy’ rating on Dixon Technologies, supported by:

• Strong play on indigenisation.
• Notable industry opportunity with electronic manufacturing services market likely to grow at 47% CAGR over next 5 years
• Company’s leadership position and expansive product mix; upside from PLI scheme in smartphones
• Pristine Balance Sheet (net cash; working capital at < 10 days)
  High return ratios
• Robust growth prospects (FY22-26E sales/PAT CAGR at +33%/53%)

Shares of Dixon Technologies closed 19% lower on Friday compared to a fall of 1.6% in the Nifty50 index. Bloomberg