▪ Growth momentum sustains in Q1 as revenue grew 95% YoY /25% QoQ. Mobile division revenue grew 125% YoY/28% QoQ
▪ Forms multiple JVs to enhance capabilities; confident of offsetting absence of mobile PLI in FY27 through backward integration benefits
▪ Ascribe 70x to June 27E EPS to arrive at June’26 TP of Rs 21,900; Maintain BUY
Performance beat on all fronts: DIXON Q1 performance beat on all fronts. Revenue/EBITDA were 21%/23% ahead of our estimates. Revenue grew 95% YoY/25% QoQ, led by a strong 121% YoY growth in the Mobile & EMS division. The non mobile division saw a revenue decline of 15% YoY/25 QoQ. EBITDA margin was flat YoY (-50bps QoQ) to 3.8% (in line with estimates), absolute EBITDA grew 95% YoY/9% QoQ.
Mobile Phones & EMS sustains YoY growth trajectory: Mobile and EMS segment delivered 95% YoY/25% QoQ revenue growth. Growth was led by client additions, strong hearables/wearables revenue (Rs 1.8bn vs Rs 720mn YoY), and a sharp rise in telecom revenue to Rs 14.1bn (vs Rs 4.2bn YoY). Ismartu contributed Rs 20bn (vs Rs 11bn QoQ). Segment EBIT margin expanded 10bps YoY to 3.4% (-40bps QoQ). Q1FY25 mobile volumes stood at ~9.5mn units. Management maintains a guidance for Rs 40–43mn in FY26 and 60–65mn in FY27, aided by anchor clients and the Vivo JV starting Q4FY26.
CE and appliances continued to decline; hopeful for a recovery: Consumer Electronics (CE) segment reported a revenue decline of 21% YoY (-2% QoQ). We believe the decline was largely on account of market share (MS) loss in the LED TV segment and sustained structural challenges in the industry (demand deceleration globally). DIXON is working on various fronts to fix the market share loss such as an expanding product portfolio, backwardly integrating to offer better pricing and looking for large strategic relationships. Lighting products revenue declined 17% YoY to Rs 1.9bn, as the segment continues to witness pricing pressure. The company is optimistic on its 50:50JV with Signify and has received an export order from a large US retailer for strips and rope lights.
Revise estimates, maintain BUY: We raise our FY26/27E EPS by 8%/5% on sustained mobile growth and upcoming backward integration. Introduce FY28, roll forward to June-27 EPS; maintain 70x multiple to arrive at TP of Rs 21,900. Maintain BUY.
