India’s 30-year-old company, Dixon Technologies, has recently surprised investors with its performance. While older companies are often expected to give moderate returns, Dixon Technologies has completely changed this concept.
In the past month, the company gave a 27% return, in the past 6 months, 63%, and over 200% in a year. Over five years, this figure has reached almost 2400%. Let’s see what this company is doing to achieve such fantastic returns.
Dixon Technologies
Dixon Technologies is one of India’s leading contract manufacturing companies, mainly active in electronics manufacturing. The company provides the following services:
- Product Design: Designing products as per customer requirements.
- Manufacturing: Manufacturing products.
- Testing: Testing products.
- After-Sales Services: Providing services after sales.
The company has five main business segments:
- Consumer Electronics
- Lighting Solutions
- Home Appliances
- Mobile Phones and EMS (Electronics Manufacturing Services)
- Security Surveillance Systems
Dixon operates under two models:
- OEM (Original Equipment Manufacturer): The company manufactures products according to customer requirements.
- ODM (Original Design Manufacturer): The company handles the complete design and manufacturing of the products.
Revenue Sources
Dixon Technologies’ main revenue comes from smartphone manufacturing. In the financial year 2022, 81% of the company’s total revenue came from smartphones. Other revenue segments are:
- Consumer Electronics: 12.3%
- Home Appliances: 3.8%
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Future of Electronics Manufacturing in India
The electronics manufacturing sector in India is growing rapidly. In 2022, its GDP contribution was 2.7%, expected to double by 2026.
- Government Initiatives: The Indian government has launched the Production Linked Incentive (PLI) scheme to encourage this sector.
- 2020: PLI launched for Large Scale Electronics Manufacturing.
- 2021-23: PLI applied for IT Hardware and other manufacturing sectors.
- China Plus One Strategy: Many companies do not want to rely solely on China. Under this strategy, India is becoming a major manufacturing hub.
Reasons for Dixon Technologies Success
There are three main reasons behind Dixon’s rising share price:
- Revenue Diversification:
- Previously, Consumer Electronics was the main revenue source. Now, Mobile Manufacturing is leading.
- The company manufactured 8.1 million smartphones last year.
- Currently, the company’s manufacturing capacity is 40 million mobile phones.
- Financial Growth:
- The company’s revenue grew at a 40% CAGR over the past five years.
- Revenue increased by over 100% in the past year.
- Profit grew by 42% CAGR over five years and 83% in the past year.
- Strategic Focus:
- The company focused on segments like Mobile and Home Appliances to improve operating margins.
- Home Appliances has the highest operating margin.
Importance of the Manufacturing Industry
Due to the Make in India initiative and other government efforts, the manufacturing industry in India is growing fast.
- FDI Inflows: There has been a surge in foreign investment.
- 21% CAGR: The manufacturing segment is expected to grow at this rate over the next 5-10 years.
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Dixon Technologies: India’s Foxconn?
Dixon Technologies’ rapid growth and the increasing potential of the manufacturing sector in India are positioning it to become “India’s Foxconn” However, it’s essential to see how efficiently the company implements its strategies in the coming years.
Conclusion
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Dixon Technologies is a shining star in India’s manufacturing sector. The increasing demand for smartphones and other electronics, government policy support, and the company’s strategic priorities make it an attractive option for investors.