Key Takeaways
- Dixon’s mobile revenue fell 5% YoY in Q3, hit by a 30% drop in feature phones, but smartphones grew 10%.
- Both Dixon and Syrma turned cash flow positive in Q3, a key financial milestone.
- Management expects mobile business growth in Q4 with new orders and benefits from the PLI scheme.
Dixon Technologies reported a dip in its core mobile business for the December quarter, but a strong overall performance and a positive cash flow turn for both it and peer Syrma SGS Technology marked the earnings season for electronics manufacturers.
Dixon’s Mobile Segment: A Mixed Quarter
Revenue from Dixon’s mobile business, which makes up 40% of its total, declined 5% year-on-year to ₹2,400 crore in Q3 FY24. The drop was driven entirely by the feature phone segment, which saw a sharp 30% fall. In contrast, the smartphone manufacturing segment grew by 10%.
“The mobile business was down 5% year-on-year. This was primarily because of the feature phone segment, which was down 30% year-on-year. The smartphone segment was up 10% year-on-year. We expect the mobile business to grow in Q4FY24 on the back of new orders,” said Saurabh Gupta, CFO of Dixon Technologies.
Despite the mobile slowdown, Dixon’s overall quarterly revenue surged 65% to ₹4,301 crore, while net profit jumped 86% to ₹97 crore.
Strategic Positioning and Future Outlook
Dixon, a contract manufacturer for brands like Xiaomi, Samsung, and Motorola, remains optimistic. The company is banking on new orders to drive growth in the March quarter (Q4). Analysts project a 25% CAGR for Dixon’s mobile business over the next three years, buoyed by the government’s Production-Linked Incentive (PLI) scheme and the China-plus-one manufacturing shift.
“We are seeing good traction in the smartphone segment. We are expecting to ramp up production for new orders in Q4FY24,” added Gupta.
Syrma SGS: Strong Growth and Cash Flow Positivity
Fellow EMS player Syrma SGS Technology reported robust Q3 results. Its net profit rose 50% to ₹30 crore on a 40% revenue increase to ₹600 crore, driven by automotive, industrial, and consumer electronics segments.
“We have seen strong growth in the automotive and industrial segments. We are also seeing good traction in the consumer electronics segment,” said Sandeep Tandon, CEO of Syrma SGS.
The Cash Flow Milestone
A significant highlight for both companies was achieving positive operating cash flow in Q3. Dixon generated ₹200 crore, while Syrma generated ₹50 crore.
“We have turned cash flow positive in Q3FY24. This is a significant milestone for us. We expect to remain cash flow positive in the coming quarters,” emphasized Dixon’s Gupta.
Both firms are also reducing debt. Dixon aims to cut its net debt to ₹1,000 crore by FY24-end from ₹1,200 crore, while Syrma reduced its net debt to ₹200 crore from ₹250 crore.
PLI Scheme: A Game-Changer
As beneficiaries of the mobile phone PLI scheme, both companies are poised to gain from India’s manufacturing push.
“The PLI scheme has been a game-changer for the mobile phone manufacturing industry in India. It has helped attract investments and create jobs,” said Tandon.
The long-term outlook remains positive, with strong domestic demand and growing export traction. “We expect the mobile phone manufacturing industry to grow at a healthy pace in the coming years,” concluded Gupta.
Dixon’s shares closed at ₹6,845.05 (up 0.5%) and Syrma’s at ₹500.05 (up 1.5%) on BSE.
