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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to Dixon Technologies Earnings Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Bhoomika Nair DAM Capital Advisors. Thank you, and over to you. .
Yes. Warm good evening to everyone. Welcome to the Q4 FY '23 earnings call of Dixon Technologies (India) Limited. We have the management today being represented by Mr. Atul Lall, Managing Director and Vice Chairman; and Mr. Saurabh Gupta, Chief Financial Officer. I'll now hand over the floor to Mr. Lall for his initial remarks, post which we'll open up the floor for Q&A. Over to you, sir.
Thanks very much, Bhoomika. Good evening, ladies and gentlemen. This is Atul Lall, and we also have on the call today our CFO, Saurabh Gupta. Thank you very much for joining this earnings call for the quarter ended March 2023.
Coming to our overall performance for the fourth quarter. Consolidated revenues for the quarter ended March 31, '23 was INR 3,070 crores against INR 2,955 crores in the same period last year with a growth of 4%, Consolidated EBITDA for the quarter was INR 158 crores against INR 128 crores in the same period last year with growth of 32%. Consolidated PAT for the quarter was INR 81 crores against INR 63 crores in the same period last year, that's growth of 28%. We are pleased to report a strong performance in the margins in the quarter with 110 bps improvement, and the margins have improved up to 5.2% in the last quarter. This has been led by a change in sales mix, operating leverage, cost optimization and efficiency measures across all businesses and configured implementation of strategic price hikes across our various ODM business.
Coming to our overall performance for '22-'23. Consolidated revenues for '22-'23 was INR 12,198 crores against INR 10,701 crores in '21-'22, that's growth of 14%. Consolidated EBITDA for '22-'23 was INR 518 crores against INR 383 crores in '21-'22, that's growth of 35%. Consolidated PAT for '22-'23 was INR 256 crores against INR 190 crores in '21-'22%, which is growth 34%. Another highlight was a strong cash innovated from the operations of INR 726 crores in '22-'23, which was used in funding the CapEx of almost INR 450 crores and reduction in gross debt of INR 275 crores, resulting in further strengthening our balance sheet with gross debt to equity of just 0.14. There has been a huge focus of the team on cash conversion cycle and working capital management. Working capital days stood at negative 2 days at the end of March '23. Our balance sheet strength and enough credit lines from banks enable us to invest in the long-term development of our business.
Our basic approach to capital policy always has been on return on invested capital and financial stability, and we have successfully improved our ROCE and ROE to 33.4% and 22.4%, respectively, as on March 31, '23. And we feel confident the same book yield improving in the upcoming quarters, [indiscernible] on account of improved earnings and working capital efficiency. We strongly believe that we have a platform to sustain strong revenue growth moving forward through strengthening in the overall demand environment and acquisition of new customers, more specifically the large accounts in the mobile business.
Now I'll share with you the performance and the strategy in each of the segments going forward.
Consumer Electronics. Revenues for the quarter was INR 981 crores with an operating profit of INR 27 crores and 3.7% operating margin, which is a significant improvement over the last year. Operating profit margins have expanded by 90 basis points year-on-year on account of operating leverage and continuous focus on backward integration and offering our own design solutions. Despite a year-on-year volume growth of 13% and 15% in Q4 and 12 months '22-'23, the revenues were lower by 3% and 17% in the same period year-on-year given significant downward correction in the prices of open sell in the international market. We have closed the ODM sublicenses rights with Google relating to Android and Google TV, which will open up a lot of opportunities for us, and 65% of the Indian market is based on this operating system. We have also tied up with Samsung for Tizen operating system. With the combined solution rollout, a large part of Indian market with Dixon oriented solutions [indiscernible] service. We'll soon be starting injection molding and have also invested in a little part [indiscernible] in line with our continuous focus on backward integration strategy to deepen the level of manufacturing in India. We are also exploring newer products with it's commercial display for which we have already received trial orders used in public evidences and information display and interactive boards for use and education institutes and offices.
Lighting. Revenues for the quarter was INR 270 crores with an operating profit of INR 26 crores and operating margin of 9.7%. This is an expansion of 260 bps year-on-year achieved through a combination of reduction in input prices, calibrated pricing action, inventory planning, value engineering and significant initiatives in better sourcing. Apart from sluggish demand, reasons for growth revenues here are reduction in commodity prices, freight rates and migration of LED bulb technology from driver base to DoD which are approximately 25% lower priced. Since LED bulbs [indiscernible] category in lighting, it has a major impact on the revenue growth. We have very aggressive plans for new product introduction in Q3 and Q4 of FY '22, '23 and will continue the momentum with the launch of strip and rope lighting in Q1 of FY 23, '24 and professionalizing products in the course of '23,'24 besides the launch of new LED bulb [indiscernible].
After getting export orders and new customers in UAE in Q3 and Q4, we have received our first export order from Germany, which will be executed in Q2 of current [indiscernible]. We are also in advanced period of discussions with potential customers in the U.S. and U.K. New smart lighting products based on Bluetooth mesh technology that we acquired from Ibahn Illumination will be launched in Q2 of current system. We have met our threshold investments in FY '22-'23 and the PLI for LED lighting components in line with the faster integration strategy that will make us even more cost competitive. And the new plant for the LED lighting components in Dehradun has already started operations in the current month. The capital employed in this business has been significantly reduced by INR 175 crores year-on-year on account of huge focus on current asset management, which has resulted in improvement in ROCE to 29% from 22% a year ago.
Home Appliances. Revenues for the quarter was INR 281 crores that saw a robust growth of 20% year-on-year and 15% quarter-on-quarter. Operating profit of INR 31 crores also witnessed a strong growth of 67% year-on-year and 23% quarter-on-quarter with expansion operating profit margins to 11%, led by passing on the impact of commodity costs and exchange rate fluctuations to our customers, improved operating leverage and cost us of optimization measures. ROCE in this business has improved 30% from 15% a year ago. A new state-of-art facility, a semiautomatic machine in Dehradun will be operational by July '23. In line with our backward integration strategy, we set up our own full room for another [indiscernible] manufacturing. The order book in these verticals for the upcoming quarters are salient.
Mobile and business. Revenues for the quarter were INR 1,410 crores with an operating profit of 59% and 4.1% operating margin, which is an expansion of 50 to 60 bps, both on year-on-year and quarter-on-quarter. We got large orders from Jio, for which manufacturing has already started; and for Nokia, our volumes have already increased significantly. Now, in addition to this, we are very, very close finalizing 2 large relationships, the largest of global brands in India. These relationships with one of the brands is joint manufacturing. And we are likely to start operations in the next 5 to 6 months in the coming quarters, for which a new facility of 320,000 square feet in Noida is in the process of being set up, which will become operational in end of June. Security Sovereign Systems. Dixon's 50% share of revenues for the quarter was INR 124 crores at an operating profit of INR 4 crores. We've expanded the capacity from 10 million to 14 million per annum at a new 200,000 square feet facility in [indiscernible]. It was operational on May 15th in the current month. Operating profit margins about -- both year-on-year mainly due to shifting [indiscernible] structure.
Telecom and Networking products. Revenue in this segment for Q4 and FY '22-'23 was INR 126 crores and INR 311 crores, respectively. Our separate facility in Noida was operational in December '22, and we achieved the threshold of CapEx and minimum regaining the first year under PLI fee. We have bagged large orders of Airtel business, set top boxes from Airtel and mass production should start by end of Q2 in the current fiscal. Also, we have done another business [indiscernible] partnership with [indiscernible] The development was -- and we started and mass production, will start from [indiscernible]. This has potential to grow even to the other geographies outside India's exports. We are in active discussions with some large [indiscernible] existing and new product categories, and building a joint team for R&D with our partners.
So today, we have already emerged as one of the largest manufacturers of ONT and WiFi 5 routers for Airtel in the country.
Laptops and tablet, IT hardware. Revenues for this segment was INR 92 crores in Q4 and INR 155 crores in 2023. This is for our major [indiscernible]. The government has recently announced [indiscernible] team for IT, hardware product, soon with a much higher incentive payout. We're studying the control of the scheme and will definitely be participating in this government initiative, which has tremendous potential. In addition, we as a brand who's orders increasing monthly, we are in discussions with some large global brands. And one of our brands, the production should be starting next month.
Rexxam Dixon Electronics Private Limited for our AC control board business, with 40-60 JV with Japanese company Rexxam which manufactures inverter controller board for air conditioners and is based out of a new manufacturing facility in Noida. They started operations in July '22. The JV company achieved the revenues of INR [ 79 ] crores and [indiscernible] crores in Q4 and FY '22, '23, respectively. It any potential in this business is huge with healthy margins and 100% ROCE. The JV company is a beneficiary under the PLI scheme and will make a total investment of INR 51 crores over a period of 5 years. We have achieved the CapEx thresholds under PLI scheme of '22-'23 and will continue to invest into the operations. Wearables and Hearables. Revenue for this segment was INR 65 crores and INR 300 crores in Q4 and FY '22-'23, respectively. We have an extremely healthy order book in this vertical, and we are targeting to almost double our 50% share in revenues in this current fiscal on account of [indiscernible] quantities, reducing [indiscernible]. That also new [indiscernible] like Bluetooth speaker and smartwatches. And a new factory that is being set up in Noida, which is a 50-50 JV with a natural marketing. They are the brand owners of [indiscernible]. In line with our strategy, we deepened the level of manufacturing [indiscernible] PCB were also been invested for. And in addition, we have started manufacturing [indiscernible] smartwatches for Samsung and the dedicated plant for mobile phones for Q4 of this current fiscal. Refrigerators. The construction is underway on [indiscernible] facility in [indiscernible]. We are creating a capacity of 1.2 million direct cool refrigerators. This is in the capacity range of 190 liters, 235 liters at multiple features and diffrent star ratings. We have already finalized and that some brands in the final stages are finalizing the tie-ups with both global and national brands. The production is expected to start in the quarter will be of '23, '24.
So I would like to stop here now and me and Saurabh are there to respond to your questions. Thank you.
[Operator Instructions] First question is from the line of Mahesh Agrawal from Agrawal Family Office.
Since there is no response from the line of Mahesh, we will move to our next question. That is from the line of Renu Baid from IIFL Securities. .
Congratulations for good performance. I have few questions. First, on mobile phones, you did share quite few developments [indiscernible] large brands coming onboard in the next few months. So can you help us, how does the guidance on the mobile segment looks for FY '24, '25 based on the timing of these clients coming onboard and [indiscernible] getting operational.
So good evening, Renu. You know that mobile is going to be our largest figure of all. And we are in the process of concluding the 2 of the largest brands present in India. I think capacities are being created. And I'm hopeful more than Q3 or in all probability, the mid of Q3 is the manufacturing for these brands will start. And large revenue, I don't want to put a number to it, it's going to come in on these 2 brands, which would be very very large..
So the guidance for FY '24, how should we look at the mobile PLI and the overall revenue stack up? Should be close to INR 6,000 crores? Or how will the numbers stats with pipeline of orders that you have, some existing and [indiscernible].
So in '23, '24, the government guideline is for INR 6,000 crores, we are confident on meeting. And we feel confident that there's going to be a significant overflow above INR 6,000 crores.
Got it. So secondly, given that various PLI incentives and our programs have been operational across segments, can you share what was the incentive income booked in fiscal '23 by Dixon across our key different verticals and in total?
So there will be 2 incentives which have been booked across -- incentives across 2 PLI. One is, of course, mobile where we are absolutely -- our incentive that in December 2022 we have received. So our share of revenues for FY '22, '23 would be somewhere around INR 9 crores to INR 9.5-odd crores. Apart from that, we have also received and achieved a threshold for the telecom PLI, which is a JV with [indiscernible] Group. So there, my sense, the JV revenue will be somewhere around INR 2, INR 3-odd crores.
And this number should substantially ramp up next year given the growth across all these entities coming through.
That's right. So next year, we will start getting the incentive of IT hardware, which we will start booking. Also for Rexxam JV, our inverter controller boards with Rexxam, whereby whatever revenues we do, we will get an incentive on that. And also on the lighting components realized, we have done the CapEx. CapEx has already begun under the inverter control of JV with Rexxam. CapEx has already been done on the lighting components PLI. I think so those incentives will start doing in the current financial year.
Sure. sir, thirdly, and lastly, in this case, consumer electricals television, the margins are very strong this quarter, 3.7, overall, improving your margin for the year. How should we look at the margin going forward in '24, especially that now the ODM mix in your revenue being substantially increased compared to fiscal '23. So any input on this side will be appreciated.
So you're right, Renu. The large part of revenues in television segment is also coming from the ODM stream.. So the margins are going to be almost in a similar range, in the range of 30, 40 bps plus minus for what we have achieved currently.
Approximately 3.5% plus/minus being...
It will hover between 3.5% to 4-odd percent.
The next question is from the line of Ankur from HDFC Life.
Two questions. One was on the overall end market demand itself for durables, specifically TV, lighting, home appliances. And we don't see a slowdown. I mean, I keep on hearing the same from different companies. But if you could help us understand what are your clients as customers telling you in some of these segments, how our pipeline or order book when you look at, say, the next 6 months or so?
So Ankur, it's been a mixed kind of a bag. In certain businesses, the order book is flattish. In certain businesses, the order book is strong. In our case also [indiscernible] being an outsourcing company, also what makes a difference is that what is the share of wallet you are able to excite in existing customers? And how is your customer recognition initiative being pursued? So coming to specifics, first 1.5 months, so I find the demand in consumer electronics and lighting to be slightly flattish. But fortunately, last 2 weeks, I'm seeing an element of positivity and things turning around. And in any case from next quarter, we're heading towards [indiscernible] period. So things are looking better.
In the case of mobile, the order book is very, very healthy. We have new customer acquisitions and we have already started manufacturing for Jio. We have a much larger share of wallet of our existing customers. In our existing anchor customer, Motorola, we are assured of a larger order book usually exports. So it's looking much, much better. Similarly, in telecom devices, the order books from Airtel is very healthy and they're really pushing up the broadband initiatives. Also in the case of wearables and hearables, the order book is very, very good. In fact, we have been pushed by our anchor customer to double our capacity for 1.2 million to 2.5 million in the next 1.5, 2 months. So it's a mixed rate of a bag. But I feel in the forthcoming quarters, in a month or 2, the [indiscernible] significantly, just what my sense is.
Okay. And also on washing machines, sir, I think that's one segment.
So washing machines that you see last year, we've grown from 1.1 million in semiautomatic to almost 1.5 million, which means 29% growth. And also in the case of FATL, [indiscernible] the base was low, [indiscernible] from practically nothing to 1.6 lakh. This year, our internal plan is to grow from 1.5 to 1.75 and in the FATL to grow to almost 250,000. So we have an aggressive growth plan.
Fair. And if you could just also remind us of the FY '24 overall sales and/or margin guidance, if any you can share? I think on the last call, I think the number was closer to INR 18,000-odd crores for '24, if I kind of remember correct, for '24, if you could just help us on that?
So Ankur, I don't want to give any specific guidance, please. However, I want to assure the stakeholders that the group [indiscernible] would be aggressive. It will be much ahead of the industry.
Okay. Fair, fair. And just last one would be if you could share the volume details by segment for FY '23, please?
So the volume numbers for TVs was -- so you want for the quarter or for the year?
Year would be great.
So on TV, we did a volume of almost 3.43 million as against 3 million last year. So that's a growth of 15-odd-percent. On LED bulbs, we did -- so broadly, we did a volume of almost LED bulbs, [indiscernible], downlighters and other SKUs put together, we did around 1 point -- somewhere around 17 million -- so INR 17-odd crores, sorry, INR 17-odd crores. And on semiautomatic washing machines, we did 1.5 million. Fully automatic machine, we did 1.6 lakhs, Smartphone outside Samsung, so basically for -- outside Samsung was around 35.4 lakhs against 35.3 lakhs last year. So there's a growth of [indiscernible] odd percent there. Feature phones, we did around 55 lakhs as against 30 lakhs, so there's a growth of 82% there. On Samsung smartphone, we did a number of almost 94 lakhs as against 84 lakhs last year, so growth of 12%. Samsung feature phone, we did 82 lakhs as against 109 lakhs, 1.09 crores last year, so there's a decrease of 25% in Samsung feature phone. And Samsung, as you know, has taken a call to shut down the feature phone -- exit out of the feature phone business. CCTVs and DVR put together, we did somewhere around 74 lakhs as against almost a similar number, INR 74-odd lakhs last year, so it's a flattish kind of a number. And set-top boxes, it is around INR 14-odd lakhs. And TWS and neckbands, together, we did almost 57 lakhs for wearables and hearables.
The next question is from the line of Aditya Bhartia from Investec.
So my first question was on margins that you report on JV and contract and consumer electronics business. Are they meaningfully better than the EMS part?
So they are. They are definitely, as I said.
Could you share some range, how much better could they be? And how you're expecting the JV in proportion to be moving in this business?
So if you see our -- basically, if you look at, Aditya, our contribution of the ODM business in TV has significantly increased from -- if you look at the -- so from quarter 4 if you look at, our consumer electronics, LED TVs, the ODM share revenues have gone from 5% to 38%. And at a yearly level, it has gone from 4% to 43%. So this is one of the reasons why the margins have expanded because of the higher share of ODM, own design solution revenues coming in, which is, of course, at much -- at slightly better margins than the average margins for the portfolio. And also, if you look at continuously, we are migrating more and more to backward integration -- a portion of backward integration. So the portion of PCB is being done for customers like Samsung to Xiaomi is increasing. We are also now increasingly focusing on more backward integration like injection molding plastics for TV apart from panel SMB as well as the motherboard for TV. And in the second half of the year, we have already out of the line, we are also looking to do LED bar TVs. So clearly, the focus is to migrate more and more in backward integration, focus more on designing. And clearly, we have got a large order from Samsung. Once the Google solution comes in from second half of this financial year, those will also have a positive impact on the margin side as well. So clearly, more than a volume play in this business, I think the margin profile has been very positive. And we'll continue to make efforts to drive higher margins in this business.
Understood. So H2, you mentioned, what exactly did you start doing?
We will roll out a solution on the Google and Android TV, which...
Yes. And then ODM, we are the only Indian Google licensee. And in the smart television segment...
[Technical Difficulty]
Ladies and gentlemen, it seems that we have lost the line for the management. We will request all of you to please remain connected while we reconnect the management line. Thank you. Ladies and gentlemen, thank you for patiently waiting. We are still trying to reach the management. We request all participants to please remain connected while we reconnect them. Thank you. Ladies and gentlemen, thank you for patiently waiting. We have the management line reconnected. Sir, over to you. [Operator Instructions]
Yes, we were discussing about the JDM part of the business, and you kind of indicated about the margin that it started to accrue. Just confirming from H2, you mentioned that you'll start doing LED? Is that...
I would say, as we've been explaining, the whole focus of television strategy is a migration to more and more our owned design solutions, which we have already launched for our anchor customer. Further, the rollout of the Google TV, for which we are the only ODM licensee in India, and also Samsung's Tizen operating software solution is going to happen in H2 of the current fiscal. In addition to this, our backward integration strategy, they have been pursued rigorously. Our mechanical plant, that is the injection molding plant, is going to become operational any day now. And also, we are committed to make investments in LED bar. This will also be installed in the second half of the current fiscal. So the strategy is migrating more and more to our ODM solution and backward integration and generate [indiscernible]. Further, we are also improving the product mix. We are in the process of launching our commercial display, for which we have already received trial orders and the commercial production is about to start and also interacted [indiscernible]. So that will start [indiscernible] consumer electronics.
Perfect. That's exactly, sir. So you spoke about Jio phone in the mobile phone division. If you could throw some light on how large the contract is, what exactly are we doing on contract side?
So we already started manufacturing the 4G phones for Jio. The manufacturing has started in the current month. And the order book is fairly healthy. expecting the order book is almost at 1 million units -- 0.5 million units a month.
Understood. And lastly, sir, did we see any margin penetrate due to RM costs coming down in the ODM business, given that typically the pass-through happens with a bit of lag?
So if you see in our ODM business, there has been a margin improvement across all our ODM businesses. That is the result of value engineering, generating operating leverage because of it's scale, improving the productivity and having the control on the cost. And a part of it is also passing on increase to our customers.
The next question is from the line of Abhishek Ghosh from DSP.
Sir, just in terms of the television segment, how should we look at the volume growth? And what can be the share of ODM over the next 12 to 18 months? How are you looking at it?
So Abhishek, if you see our '21/'22 numbers [indiscernible] were around [ 2.9 million ] In the last fiscal, we have grown to 3.4 million, which is 15% growth. We appreciate this kind of volume growth has happened in spite of the industry ongoing, and internal budgets for the current fiscal are around 3.8 million, which is a growth of around 10%. That's what we are targeting for the current fiscal.
How should the share of ODM move from currently 35% in the current quarter? How should that look over the next 12 to 18 months?
So we see that the ODM is going to be almost 45% to 50%.
Okay, okay. Sir, large part of the ODM-led margin benefit has already got reflected in the current quarter. Is that a fair assumption, sir?
Well, actually, there's going to be a further trigger when the rollout for our own ODM Google solution [indiscernible] happen. But for that to ramp up, it will take some time.
Got that. Great. Sir, in terms of the lighting segment, while you did allude to a point that because of the lower raw material and change in product mix and the change in technology as well, revenues have been muted. But just in terms of volume also, and you had also spoken about the competitive intensity in the earlier quarters, how has that been panning out? And is that also a reason for slightly sluggish top line? Just to comment there, sir.
Yes, you're right. The market has been flattish [indiscernible] opportunities going to be happen, and also the competitive intensity is there. So in Dixon's case, our large revenue generator has been SKUs like LED bulbs, wherein the growth is not happening. So one, of course, a lot of initiatives has happened on expansion of the product portfolio. One, more and more product rollouts on the ceiling and downlighter side is happening; second, a new product category for ropes and strip light has been rolled out and the commercial production is just about to start, which is again going to active our revenues.
Further, our professional lighting solutions are also going to be rolled out in second half of the current financial. Also monetization of the smart lighting, which we had acquired from IBank will also start happening in the current fiscal. So these are certain quantitative steps being taken up by the team for the revenue growth.
Okay. Sir, just one last thing in terms of -- you mentioned in a couple of large clients whom you're likely to sign up and their factories are getting constructed. So I just wanted to get some clarity around that you start doing the CapEx even before the final deal is signed. And how does it work? And how should we look at it?
So we appreciate we have been sharing the progress for a couple of quarters. And the large customer calculations take their own time because the discussions happen both on the technical and the commercial tangents. We are almost at the final stages of conclusion. And the commercial production for one of them is about to start soon. For another one, I think it will take 2 to 3 months to start. So we are at very, very advanced stages of concluding that. We're almost there. So that's what I'm in a position to share at this stage.
So my only point is, sir, you're committing the CapEx in anticipation. So there's a fair amount of visibility, that's the reason you're going ahead and committing that CapEx...
Yes, yes, absolutely. Otherwise, no CapEx can be...
Sure. And is Tinno arrangement somewhere helping you?
Sorry?
The arrangement with Tinno that you had done some time in February...
No, Tinno is an entirely different project, which to start -- expose to U.S. market.
The next question is from the line of Dhruv Jain from Ambit Capital.
Sir, I have a question with respect to Lighting, right? So you mentioned with respect to the export starting to Germany et cetera and some of the technological changes that have happened in this space. So how should we look at the growth in this vertical, say, in FY '24 and '25? What is the internal target that you are setting yourself? Also, you had some issues internally in teams, have they been resolved?
So as I said that the domestic market has been kind of flattish and sluggish. We are pursuing the product expansion, heading into [Technical Difficulty] in lighting as a category in the current fiscal also...
I have one more question. If you could just indicate what would be the CapEx for '24 and '25?
Sure. Things would be in the range of INR 400 crores.
Dhruv on '23, right? Or '24-'25?
Sorry, '23-'24, I'm sharing. It's going to be around INR 400 crores.
The next question is from the line of Dhananjai Bagrodia from ASK.
Sir, I just wanted to ask you, maybe I missed this. For consumer electronics, what would be the open sell prices and realization for the year?
Yes. So Dhananjai, if you look at the consumer electronics, so our selling prices for the quarter, core was around -- average was around INR 11,700. And similar to last year, average was around INR 14,000. So this clearly has come down. I'm comfortable with it as the current prices of all -- complete category that we put together. But the major reason for that is the [Technical Difficulty]. It has come down to [Technical Difficulty]. I'm saying I think full year level in '21/'22, the selling prices for us at a total level was around INR 16,400, which has now come down to around INR 11,500 for '22/'23. So clearly, there has been a pricing or the value being lower by 30%, mainly on account of the open sale, where the prices have corrected in the international market.
So open sales, would the price decrease be exactly [ consummate ] to this?
Almost.
Almost, I guess. Yes.
Okay, sure. And sir, another question here, other expenses as a percentage of sales has been declining. Would it be fair to assume that this would be a steady state? Or is there scope for more improvement from here?
Yes. So clearly, all the other expenses, depreciation, finance costs as a percent of the revenues will keep coming down. So only expense, which will be more or less be in the similar lines. Of course, that has been a reduction in this [indiscernible] as well when the cost of material [Technical Difficulty]. So basically, your observation is right. All the expenses as a percentage of revenue, whether it's employee expenses, other expenses, depreciation of finance cost, as a percentage of revenue will keep coming down, because we have got some significant operating leverage benefits in some verticals. And some verticals that will kick in this financial year. And overall, it will start reflecting it. So your observation is absolutely right. It should keep coming down.
Any guidance in terms of what could be the base case or anything on that, sir?
Yes. So if you look at the operating profit margins, you've expanded by 50, 60 bps and gone up to almost [ 4.3% ]. My sense is, clearly, this year also, there can be a possibly margin expansion of around 20, 25 bps. But one has to wait and watch on the whole demand scenario, which, of course, should pick up ahead of the festive season.
Sure. And this 5.1%, this quarter would -- this will be obviously on the higher end and this is something which you see -- obviously, Q4 is always better. So how should we look at that?
Actually, we got dropped off and the call has been transferred to the mobile, where I think so the reception is not that clear. If you just allow me 1 minute, we'll go back to our intercom. Just give us 1 minute, please, and then you can ask a question there, please.
Ladies and gentlemen, please stay connected while we reconnect the management. Ladies and gentlemen, we have the line for the management reconnected. Sir over to you.
Yes, please go ahead.
So not sure where I dropped off. But I was asking this 5.1% OPM, which we had this quarter, this would be a little on the higher side. And you mentioned that 4.2%, 4.3% is what you think would be sustainable for FY '24/ '25, right?
So the point that I wanted to bring about that last year, '21-'22, our margins went up to 3.6% mainly because there's a big supply chain impact, commodity prices impact, which has now been completely settled. So we have clearly expanded the margins to 4.3%. We think with the benefits of operating leverage coming in, migration to ODM that we are focusing on in most of the verticals and also more and more backward integration, clearly, we see that some kind of margin expansion if possible in this 4.3%. So broadly, you should look at a range of almost 4.3% to 4.5% -- 4.2% to 4.5% kind of a range for this financial year.
Okay. And if I could squeeze in one question. I know guidance will be little tough to guess, but approximately any -- apart from mobile phones and maybe in somewhat in washing machines, any other segments where you see double-digit growth going ahead?
So I've shared with you the volume growth in televisions. Now, that value is also increasing because the open sell price has already gone up by almost 15%. So there will be a value growth. There would be definitely a significant growth in washing machines. I've shared with you our current plan, which is almost 20% more than the last year. There will be, of course, large growth in mobile side.
In lighting, I've talked about the growth of 15%. In the new category of [ wearable ] wearables where the base was low and the order book is extremely high, the growth is going to be extremely aggressive, the new vertical of telecom devices, again, the growth is going to be good because the base is low. In Rexxam JV, the order book from Daikin is very healthy. So the growth definitely is going to be much, much ahead from the industry growth. We are fairly confident about it.
Okay. And sir, last question is bookkeeping question. In our mobile phones, ex mobiles, the other business is what? Margin would there be approximately?
Yes. So other businesses, the margin profile would be better as compared to mobile. So if on an average, we have done as a margin of 4.1%, so broadly, those margin profile will be upwards of 4.5% in other business.
So there -- another businesses and EMS is going to be around 30, 40 bps more than mobile.
The next question is from the line of [ Omkar Garude ] from Shree Investment.
I was asking about -- so in an interview you had given a guidance of around INR 23,000 crores to INR 24,000 crores of revenue by FY '27. So if we calculate that from current INR 12,000-odd levels to INR 23,000 to INR 24,000 crores, it's almost doubling, say, in next 4 years from '23 to '27. So that is around, say, 15% to 17% kind of growth in the revenue front, so which is much lesser than which the growth which you were talking about earlier, say, 1 year back, say, growth of around 25%, 30%. So what has exactly changed?
That was my response to an overall number when the anchor asked me over 4 to 5 years' time frame. Here I am very specific in responding to you that the growth is going to be much ahead of the industry growth. I don't want to put a number to it.
Okay. And what is the current industry growth...
So across various businesses it's different.
Correct. But you are saying it will be much larger than the industry growth, You would be knowing, right? What kind of overall...
I don't want to get into a specific answer in that question, please.
Okay. So the internal target is at least to double the revenue in the next 3, 4 years?
That's right.
The next question is from the line of Sonali Shah from Emkay Investment Managers.
Since there's no response from the line, we will move to the next question. That is from the line of Pulkit Patni from Goldman Sachs.
Sir, just wanted to understand the landscape of mobile EMS right now in India. There was a news flow around [ Wistron ] possibly exiting India how are we looking at the whole Apple business? Is there something that you can share on that account? How are the Chinese companies doing in terms of own manufacturing? Are any of them planning to do more in terms of outsourcing where we could benefit from? Just to understand the broader landscape on mobile EMS and where we are.
It's an extremely pertinent question. I would like to respond at 2 levels. So undoubtedly, Apple is the flag bearer of mobile -- of mobile manufacturing store in India. And that's on a high-growth path. And I would compare it to the Maruti Suzuki story, which can give a flip to the auto industry back in 80s and 90s. And that component ecosystem, that devices manufacturing ecosystem is on a very, very high growth path. Now whether the opportunity exists for the Indian players there, we are of a firm conviction, yes.
But it's going to take some time. It's going to happen through partnership routes. And definitely, there will be a large opportunity for mobile Apple ecosystem for Indian manufacturers, definitely. Second is the EMS story. One of those is dominated by the global players. Our kind of focus is on Apple and Samsung. Second is the Chinese brands. And please be rest assured the more and more Chinese brands are looking at outsourcing is a big problem.
And it's not only going to be devices manufacturing, it's also going to be the creation of the component ecosystem. It's also going to be deepening of manufacturing. And hopefully, at some point of time, apart from Apple, India possibly will emerge as an exporter. That's at the broader level. I'm just trying to respond to your question on the landscape of mobile manufacturing in India.
Sure, sir. That's helpful. So maybe I'll slip in one more. Sir, I know you're not giving any guidance, but mobile is a very large part and any delta there could be significant. Since you're putting in CapEx for the 2 new customers, you'd have some visibility on their contribution for FY '24. So if you could just talk about how much could those 2 new customers be in terms of contribution because that will help us sort of understand the revenue trajectory there?
So you see, any new customer acquisition, ramping of production, stabilizing production it takes some time. And to give some kind of firm number to it is slightly difficult because the stabilizing of operations takes time. However, I feel that these 2 new accounts on a combined basis can generate INR 4,000 crores, INR 5,000 crores of revenue in this current fiscal itself.
The next question is from the line of Nikhil Agrawal from VT Capital.
Sir, I had a question on the mobile phone division. Last quarter, you had guided for INR 8,000 crores of revenue, if I'm not wrong. And now you are guiding for INR 6,000 crores of revenue for FY '24. So any reason for this cut?
So I have not cut anything. I have not given any guidance for this year. What I just spent -- responded to Renu was that upward saving for our PLI and also, there is an overflow provision in the PLI scheme is INR 6,000 crores. We are assured of that. But we are confident of surpassing that significantly.
So if you look -- if you listen to the answer which was given in the previous question, clearly -- and what was given in the last call, I think so those numbers are almost similar.
Okay. Got it. And sir, one more question. It was -- like in the last quarter, you had mentioned that you would be acquiring a large customer in March. So like what -- like any update on that in the mobile segment?
So this is what I just shared in responding to last 3, 4 questions, that we are at a very, very final stage of closing down on a couple of customers, and the manufacturing for these customers should start in the next 3 to 4 months. A new factory is being set up of 320,000 square feet, which will be operational by July, August.
The next question is from the line of Aditya Bhartia from Investec.
Sir, my question is on the CapEx number, wherein it seems that we have done roughly INR 170 crores of CapEx in Q4 given that you had indicated that CapEx stood at INR 280 crores per 9 months. Is it mainly on the mobile phone facility that we are speaking about? Or there's something more to it?
No. So -- sorry...
Yes. So Aditya, one, of course, we have done some part of the CapEx on mobile, but that large part of the CapEx will happen in Q1 is currently happening both on the new plant as well as the machineries and the lines required for those potential customers. I think so the Q4 CapEx that you're talking about, INR 170 crores, a significant portion has gone into a refrigerator plant, which is now hopeful of -- we will be light that plant by November. So a lot of advances, machinery, construction of the 20 acers facility is happening at a very fast pace now. So significant portion of the INR 170 crores has gone to refrigerator. Mobiles is also part of it. And also a semi-automatic washing machine, we are having -- we were -- we'll be coming out with a new plant in the -- we're building a new plant, which will be operational by July. So construction on that, machineries, all put together, yes.
Understood. And just one clarification. For Jio phone, you had mentioned 0.5 million order book per month. Did I hear that correctly?
That's right.
Yes, yes. So -- but it's not a continuous business. Jio projects -- the Jio orders come in [indiscernible]. So the current order book is of this kind.
Understood, understood. And overall, we have the order book for maybe 2 to 3 months.
Something like that.
The next question is from the line of Alok Deshpande from Nuvama Institutional Equities.
My question is a little bit long term. If you look over the next maybe 3 to 4 years or 5 years, is there -- are there any categories within electronics, which are completely untapped in the sense that which you currently have not at all entered? Any color you can give on that?
So we feel that in Dixon's case, our growth journey has been, of course, growth in the existing businesses, and existing businesses getting a larger share of existing customers and also acquiring new customers. Apart from that, building on our core competence of electronics manufacturing. Every year, practically, we've been venturing into new business. So we started off only with television, lighting, washing machines, air conditioning components, refrigerators, mobiles, telecom devices, set-top boxes, GWS, smart watches.
We feel that this is the current opportunity pool, particularly after the PLI version 2 has been enrolled out with the government. A large opportunity can be IT products. So the team is studying the contour of the new PLI scheme, We feel there's a large opportunity for us. So that is what I see as of now. But many, many -- everything is electronics, many, many things will come the way of the industry. And in Dixon, we will not lose any kind of opportunity. So as of now, what I see in front of us apart from existing businesses is the IT products.
Sure. Understood. And just one clarification on this -- the 2 new potential customers that are coming on the mobile division. Sir, last time when you had given the guidance of mobile revenue going up from INR 4,000 crores to INR 8,000 crores, I presume you were assuming that the commercial production there would start probably in the of Q1 of FY '24. Now that getting pushed out to Q3, do you still see that kind of quantum of revenue coming in, in FY '24? Or you are largely indicating the quantum that can potentially come on an annual basis?
So see, any start of a new large account has its own been challenges. So I'm not commenting on any number. However, at the same time, we as a team in Dixon are fairly confident of generating that number.
Also, there has been a small change until last time we were talking about 2 customers, including Tinno, which we've already announced. Now we're including Tinno, we are talking about 3 customers.
And also, we are talking about Jio, which is already operational.
And Nokia increased quantities. So that has given us more confident that despite these new customers only running for 6 months of operations, we can still achieve those kind of numbers that we had guided for earlier.
Understood. Very clear. Just one very small question. The margin improvement that we have seen in Q4 sequentially and -- as well as year-on-year, now a lot of the drivers that were mentioned at the start of the call seems very structural to me in terms of strategic price hikes, cost efficiencies, et cetera. Now is it fair to assume that now this -- not at an overall level but across segments, these margin levels become the new normal for this year or coming year?
So we appreciate in Q4, the margins have expanded by 110 bps to 5.2%. Now are they sustainable? I think we should be conservative. On an annual basis, the margin is around 4.2%, which increased from 3.6% on an annualized basis. We feel that from 4.2%, there is a possibility of improvement by 30, 40 bps, but let's see.
We have the last question from the line of Keyur from ICICI Prudential Life Insurance.
And congrats for good set of results. Sir, the question is on lighting and washing machine. So despite all the initiatives in lighting, it is about new category additions of say commercial lighting, rope lighting and one more driver of export. On the other hand washing machine, we are adding fully automatic and earlier we have talked about export opportunity as well. So despite that, our overall growth numbers are in line with what the industry is growing or slightly higher than that. So what has happened? Is it because of the industry slowdown? Because earlier, we were talking about new customer additions as well in washing machines. So just to get an idea of where -- what's happening on the export side because that was considered a big opportunity in lighting and more customer addition in fully automatic washing machines. So just your thoughts on -- despite all these drivers, why slightly -- not so muted but moderate growth guidance?
So responding to your question on washing machines, we started with our anchor customer, Bosch, and more and more new customers are being added. Please be rest assured. This customer acquisition is being pursued very aggressive. And it's also maturing. And we are the only large ODM FATL player in the country. So the growth is going to be good. But launch of any new solutions with the new customer on a complex product like fully automatic top loading, it takes its own time. And that's the reason the indicative numbers are slightly conserve.
On the lighting side, whatever -- undoubtedly, the market -- the domestic market has been flattish. And also, the unit price in certain SKUs like LED bulbs and battens have been significantly declining. We are trying to build the volumes there. But the main growth is going to come to addition of new categories like expanding the product portfolio of ceiling lights and downlighters, launching the strip light and rope light for basic commercial production is just about to take off, launch of professional lighting for which our R&D teams has been strengthened significantly, and rollout is on the way and then exports. So I have guided for around 12% to 15% growth in lighting, which I feel that with the unit price decline is an aggressive target.
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to Ms. Bhoomika Nair for closing comments. Thank you, and over to you, ma'am.
Yes. On behalf of DAM Capital, I would like to thank everyone for being on the call and especially the management for giving us an opportunity to host the call. Thank you very much and wishing you all the very best, sir.
Thank you, everyone, and thanks, Bhoomika. Thanks very much really...
Thank you, everyone. Thank you, Bhoomika.
Thank you very much. Ladies and gentlemen, on behalf of DAM Capital Advisors Limited, that concludes the conference. Thank you all for joining us, and you may now disconnect your lines.