Dixon Technologies is on track to significantly boost its smartphone manufacturing output, with projections indicating volumes could reach 38-40 million units by the end of fiscal year 2027. This ambitious target is largely supported by existing contracts and the impending ramp-up of production for Vivo, a key client.
According to a recent report, Dixon anticipates achieving approximately 32 million smartphone units from its current client base, excluding Vivo, by FY27. The addition of Vivo's manufacturing, expected to commence by Q3FY27 and scale up in Q4FY27, is projected to contribute an additional 6-8 million units, pushing the total past earlier estimates by JM Financial of 36.5 million units.
Strategic Growth Across Segments
The first half of FY27 is projected to see Dixon produce around 17 million smartphones. Exports for major brands like Motorola and Transsion are expected to play a crucial role in meeting full-year targets, particularly in H2FY27. Looking further ahead, Dixon aims to scale smartphone volumes to 60-62 million units in FY28E and approximately 70 million units in FY29E, with exports potentially accounting for 10-15 million units.
Beyond smartphones, Dixon's non-smartphone businesses are also demonstrating robust growth. The company targets revenues exceeding Rs 8,000 crore from its telecom segment and over Rs 6,000 crore from IT hardware by FY27E. Dixon has already initiated manufacturing for major IT hardware clients including HP, Acer, Lenovo, and Asus. A joint venture with Inventec is set to begin production soon, focusing on IT hardware by Q4FY27 and servers in FY28E. The company aims to capture a 25-30 percent share of the estimated $8.5 billion IT hardware manufacturing industry.
Backward Integration and Margin Expansion
Dixon is also making significant strides in backward integration to enhance margins. Trials for display sub-assembly are scheduled to begin by Q4FY27, backed by an investment of Rs 1,200 crore. This planned capacity includes 55-60 million smartphone displays, with 65-70 percent targeted for internal use, alongside approximately 2 million IT hardware displays and automotive displays. This initiative, combined with camera module sub-assembly, is expected to support a margin expansion of 50-60 basis points in FY28E and 100-120 basis points in FY29E from current levels.
Despite these positive growth indicators, the company faces some challenges. Memory-led supply issues are expected to persist for the next three to four quarters, keeping average selling prices elevated. While Dixon is on track to meet or slightly exceed its Q2FY27 smartphone volume guidance of over 9 million units, rising average selling prices could potentially impact EBITDA margins under its fixed-fee model. Analysts have slightly trimmed EPS estimates for FY27E-FY29E by 2-4 percent but maintained an "ADD" rating with a target price of Rs 14,800.