Dixon Operating Margin Falls 110 Basis Points to 2.7% in Second Quarter

Key Facts

Dixon Technologies' second-quarter fiscal 2027 results showed operating margin falling 110 basis points year on year to 2.7%, according to Business Standard coverage. The report attributed the pressure to the end of production incentives linked to mobile phone manufacturing and delays in passing on raw material costs. The margin in the mobile and contract electronics segment fell 100 basis points to 2.5% during the quarter. These figures put pressure on profitability at the center of the company's results, despite phone production volumes remaining strong. Margins in the consumer electronics and home appliances segments also declined, though by different amounts.

In consumer electronics, which accounted for 5% of sales, the margin fell 50 basis points to 3.6%, according to Business Standard. The segment grew 17% year on year during the quarter. Home appliances, which accounted for 3% of sales, saw revenue grow 37% year on year, led by washing machines. But its margin fell 350 basis points to 8.2%. The comparison shows that sales growth in both businesses came alongside weaker profitability, with a steeper decline in the home appliances margin. The report said higher input costs and delays in passing them on to customers pressured margins.

Dixon's phone volume reached 9.7 million units in the second quarter of fiscal 2027, flat year on year and up 29% from the previous quarter, according to Business Standard. This came as overall smartphone market volumes fell 16% year on year. The managing director said higher component prices were being passed on to customers and that this had not reduced demand. The report said delays in passing on raw material costs were among the factors pressuring margins. At the same time, the mobile and contract electronics segment margin fell 100 basis points to 2.5%. Thus, quarterly volume growth coincided with pressure on the segment's margin, while the company's volume remained flat compared with the same period a year earlier.

The company expects to produce 33 to 34 million phones during fiscal 2027, with production at its joint venture with Vivo set to begin in the fourth quarter of the fiscal year, according to Business Standard. Phone volume projections rise to around 55 to 60 million units in fiscal 2028. The report cited Motilal Oswal Research as saying potential additions in fiscal 2028 include 6 to 8 million units from a new domestic customer. Motorola and Transsion exports could also rise from 3.5 million units in fiscal 2027 to around 5 to 6 million the following year. The report estimated Vivo volumes at around 18 to 20 million units in fiscal 2028. Dixon shares closed at 11,000 rupees on October 30, down 4.25% in the session; the results had been announced after the market closed on Friday, according to Business Standard data.