New Delhi: Dixon Technologies Ltd, India’s largest listed electronics manufacturer, reported lower-than-expected profit for the April-June quarter as supply-chain disruptions, higher raw material costs and the expiry of a key government incentive scheme squeezed margins despite robust revenue growth.
Excluding the exceptional gain from the sale of its stake in , the Noida-based company’s net profit fell 2% year-on-year (y-o-y) to ₹218 crore, missing analysts’ expectations — a Bloomberg poll of 22 analysts had projected expected net profit of ₹228.3 crore.
A 23% rise in cost of materials to ₹15,064 crore further hit profitability. The cost pressures also affected ’s operating margin, which in the June quarter took an 80 basis points (bps) hit to drop to 3% for the period.
Revenue, however, rose 21% to ₹15,548 crore, beating the Bloomberg analysts’ poll estimate of ₹14,340 crore on the back of higher-value mobile phone production.
Atul Lall, who was reappointed Dixon’s managing director for five years on Friday, said in a post-earnings analyst call that the company’s numbers were driven by increased production of its largest mobile phone customers. However, significantly higher cost of operations and capital expenditure in inventory hit its profit.
“The overall smartphone market demand remains weak. To put the quarter in simple terms, Dixon gained market share in smartphones by retaining consistent volume of mobile phone production, while the volumes of other competitors declined. At the same time, the industry has moved away from volume growth to value growth, which is why even at flat volumes, our revenue grew,” Lall said.
The’s performance appeared bleak in contrast with its fellow electronics maker Syrma SGS, which on Wednesday reported 67% y-o-y rise in revenue to ₹1,588.6 crore, while net profit more than doubled to ₹105.7 crore in Q1FY27. However, notably, Syrma SGS does not operate in mobile phones, where the slowdown in demand and cost impact have been the highest.
Analysts said Dixon’s heavy exposure to mobile phones made it susceptible to impact from the slowdown, since the hit from the ongoing electronics supply chain crisis is the heaviest on mobile devices.
“We don’t expect any margin improvement for Dixon in the current fiscal, but all factors taken together could improve operating margin from next year onward,” said Harshit Kapadia, vice-president at Elara Capital. “Until then, most changes would be slight quarterly tweaks, as the current quarter margins were impacted by some foreign exchange impact as well.”
Kapadia added that Dixon’s investments in local component manufacturing initiatives may take some time to boost its margins.
Lall concurred. “Our display module operation has not yet begun, while the camera module operation under Q Tech India generated ₹500 crore last year, and is yet to be mature. At the same time, exports contributed to ₹1,100 crore (about 7%) of our top line this quarter—within two years. As our anchor clients ramp up business with us, we’ll see exports generate up to ₹20,000 crore annually by then.”
In comparison, Syrma SGS reported 25% of its revenue from exports, which grew 67% to ₹381 crore in Q1FY27.
In an interview with Mint following the company’s results, Saurabh Gupta, Dixon’s whole-time director and group chief financial officer, said there were three reasons why the company took a hit to its profitability for the quarter.
“The first is the rise in costs, which has led to higher capital expenditure on raw materials. The second is the fact that the first tranche of production-linked incentives (PLI) to mobile phones expired in the June quarter, thus dampening our margins as we await to understand how the new mobile phone manufacturing scheme (MPMS) will play out. Finally, the cost of polymers used in washing machines and refrigerators shot up due to supply chain crises and geopolitics, which in turn pushed our margins lower in these key segments,” Gupta said.
Going forward, Gupta said that the contours of the MPMS incentivization programme could play a key role in boosting Dixon’s profitability and operating margin, as will any improvement to the current supply chain dynamics.
That said, by end-FY27, Gupta said that Dixon’s Vivo deal will have “some” impact on the company’s revenue, and retained the “up to 45% revenue growth” guidance that he had given in an interview with Mint on 12 May.
“Vivo produces about 37 million mobile phones every year, and we expect about two-thirds of this volume to come to us. This, though, would be for the full year. While we’ll certainly realize some impact of this joint venture this year, it remains to be seen how fast we can integrate our operations,” the top executive added.