Dixon reported an 81% year-on-year increase in net profit to Rs 746 crore for the second quarter of FY26, while revenue rose 33% to Rs 15,351 crore. Manufacturing of mobile phones, wearables, telecom equipment and IT hardware, which account for 90% of revenue, grew 41% year-on-year, contributing Rs 472 crore to operating margins.
The company has applied for government incentives under the Electronics Component Manufacturing Scheme and plans to invest Rs 3,000 crore in its components business over the next two to three years. Managing Director Atul Lall noted that these measures are aimed at protecting margins after the PLI program for smartphones ends later this fiscal, although some pressure is expected in the near term.
Backward integration to save costs and expand IT hardware
Dixon’s component strategy aims to improve backward integration and eliminate the 4 to 5% cost disadvantages in IT hardware manufacturing. “If we can do this in the next seven to eight months, our cost structures will be as good as China’s,” Lall said.
IT hardware revenue rose to Rs 331 crore in the second quarter from Rs 57 crore a year ago. The company is targeting Rs 1,200-1,300 crore in IT hardware revenue this fiscal, with an ambition to reach Rs 4,000-5,000 crore in the next two years. A joint venture with Taiwan-based ODM Inventec will start production of data center components in the first quarter of FY27.
Dixon is also in discussions with a global smartphone ODM and expects production to start in late FY26 or early FY27, with expected volumes of around half a million units per month. Export opportunities, especially through the stake in Transsion, are central.
Motilal Oswal
Motilal Oswal maintained a ‘Buy’ rating with a target of Rs 22,500, noting that Dixon’s Q2 revenue and PAT were largely in line with estimates. The brokerage highlighted 42% year-on-year growth in the mobile segment, helped by the Ismartu integration and higher customer volumes, as the key driver of performance.
The brokerage said overall growth was partly impacted by a GST-related slowdown in consumer demand and deferral of customer decisions. However, Motilal Oswal sees a recovery in demand for consumer durables, which is expected to support further growth in the third quarter. The brokerage also highlighted Dixon’s continued focus on backward integration through PLI initiatives and long-term joint ventures, which should improve efficiencies and strengthen client relationships.
Motilal Oswal revised its estimates to take into account improved margin assumptions for the home appliances segment and expects a CAGR of 36% revenue, 41% EBITDA and 46% PAT over FY25-FY28, with EBITDA margins of 3.8%, 4.1% and 4.4% in FY26, FY27 and FY28, respectively.
JM Financial
JM Financial gave Dixon an ‘Add’ rating, stating that the second quarter results allayed concerns about a potential slowdown in the mobile and EMS sectors. The broker noted that mobile and EMS revenues grew 41% year-on-year, while consumer electronics (-32%) and home appliances (-3%) remained weak due to deferred purchases following expected GST cuts.
The brokerage emphasized that Dixon’s backward integration plans are largely on track, with camera module assembly consolidated in September 2025 and display assembly expected to be operational in March-April 2026. The company also noted that Dixon is in discussions with a major global ODM, which is expected to begin production in Q4 FY26/Q1 FY27, potentially adding 0.5 million units per month.
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While JM Financial slightly lowered FY26E EPS estimates due to higher financing costs and minority stakes, its FY27 and FY28 projections remain largely unchanged. The broker values Dixon at 60x September 27E EPS, which means a target price of Rs 18,000.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of the Economic Times)
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