Dixon Technologies may end FY27 with volumes of 38-40 mn smartphones as Vivo ramp-up nears: Report

Dixon Technologies Ltd is largely on track to achieve its ex-Vivo smartphone volume guidance of about 32 million units in FY27E, with H1FY27 expected to end at about 17 million units. In H2FY27, exports from Motorola and Transsion are expected to support full-year targets, while manufacturing for Vivo is likely to begin by Q3FY27 and ramp up in Q4FY27. Taken together, Dixon could end FY27E with smartphone volumes of 38-40 million units, against JM Financial estimates of 36.5 million.

The note said the company is aiming to scale smartphone volumes to 60-62 million units in FY28E, versus JM Financial estimates of 57 million, and then to about 70 million units in FY29E, with 10-15 million units potentially led by exports. It also said Dixon's non-smartphone businesses, telecom and IT hardware, continue to scale well and are targeted to rise to more than Rs 8000 crore and more than Rs 6000 crore respectively in FY27E.

Display sub-assembly trials remain on track for Q4FY27 and, along with camera module sub-assembly, are expected to support margin expansion of 50-60 basis points in FY28E and 100-120 basis points in FY29E from current levels. The note cut its FY27E-FY29E EPS estimates by 2-4 per cent and maintained ADD with a target price of Rs 14,800, based on 50x Sep'28E EPS.

According to earlier guidance, exports from Motorola and Transsion should help Dixon meet its full-year smartphone targets in H2FY27, while Vivo is expected to start contributing from Q3FY27 and see a ramp-up in Q4FY27. For FY28E, the company expects volumes to be driven mainly by the full-year impact of Vivo and some early signs of growth in exports. By FY29E, around 10-15 million smartphones could be export-led. The note added that memory-led challenges are expected to continue for at least the next three to four foreseeable quarters, keeping average selling prices elevated.

In the non-smartphone segment, telecom and IT hardware are expected to gather further momentum in Q2FY27 after a good Q1FY27. Dixon has commenced manufacturing for all its key IT hardware clients, including HP, Acer, Lenovo and Asus. Manufacturing under its joint venture with Inventec is expected to begin soon, with IT hardware likely by Q4FY27 and servers in FY28E.

Within IT hardware, the company aspires to eventually capture a 25-30 per cent share of the about $8.5 billion manufacturing industry. It is also continuing to scout inorganic opportunities in Industrial EMS, with a focus on building a presence in domestic and global markets.

On backward integration, display sub-assembly trials are on track to begin by Q4FY27, backed by an investment of Rs 1200 crore. The planned capacity includes 55-60 million smartphone displays, of which 65-70 per cent is targeted for internal use, around 2 million IT hardware displays, and automotive displays. The note said this, along with camera module sub-assembly, should support the expected margin expansion over FY28E and FY29E.

The note also said the company is on track to meet or marginally beat its Q2FY27 smartphone volume guidance of more than 9 million units. However, average selling prices continue to rise, with JM Financial estimates pointing to a quarter-on-quarter increase, and this could keep EBITDA margin in check under Dixon's fixed-fee model.

The note said Dixon remains on track on its ex-Vivo FY27E guidance, is preparing for Vivo production to begin by Q3FY27, is scaling its telecom and IT hardware businesses, and is pushing ahead with display and camera sub-assembly to support future margin gains.