Dixon Technologies: Navigating Growth and Strategic Expansion in Q2 FY26

Dixon Technologies, a pivotal player in India's electronics manufacturing services (EMS) sector, has reported a robust performance for the second quarter and first half of fiscal year 2026. Despite facing some market headwinds, the company demonstrated strong growth in revenues and profitability, underpinned by strategic expansions and a disciplined financial approach. For Q2 FY26, Dixon recorded consolidated adjusted revenues of INR 14,858 crores, marking a significant 29% year-on-year increase from INR 11,528 crores in Q2 FY25. Adjusted EBITDA surged by 34% to INR 564 crores, while adjusted Profit After Tax (PAT) grew 27% to INR 323 crores. This performance reflects the company's resilience and its ability to capitalize on the burgeoning Indian electronics market.

However, the quarter was not without its challenges. The management noted that a mid-August reduction in GST rates led to a temporary postponement of purchases across trade and consumer channels, particularly impacting segments like TVs, refrigerators, and washing machines. Demand began to normalize only after September 22, leaving a short window for full recovery within the quarter. Despite this, Dixon maintained an efficient working capital cycle at a negative 6 days and showcased a strong balance sheet with a net debt of INR 203 crores, alongside consistent improvement in return ratios, with ROCE at 49.1% and ROE at 34.3% as of September 30, 2025.

Segmental Performance and Strategic Initiatives

Dixon's growth was primarily driven by its Mobile & Other EMS division, which contributed INR 13,361 crores to Q2 FY26 revenue. This segment saw a 41% year-on-year growth in revenue and a 53% growth in operating profit. The company continues to be the largest domestic manufacturer of mobile phones, leveraging high volume capabilities and best-in-class infrastructure. The Consumer Electronics & Appliances segment, encompassing LED TVs and refrigerators, reported INR 956 crores in revenue. The refrigerator business, in particular, faced subdued growth due to new, more stringent energy efficiency norms.

In the Home Appliances division, revenue stood at INR 429 crores, with an operating profit of INR 50 crores. The company is expanding capacity for fully automatic washing machines and is set to commence production of semi-automatic washing machines and robo vacuum cleaners by December 2025. The Lighting segment, through its 50:50 JV with Signify (Lightanium Technologies), began operations in August 2025, with a robust order book for premium indoor and professional lighting products.

To further solidify its market position and drive future growth, Dixon is undertaking several strategic initiatives:

Deepening the Manufacturing Ecosystem

A significant focus for Dixon is backward integration and expanding its manufacturing capabilities. The company has entered a 74:26 joint venture with HKC for display modules, aiming to create capacity for 24 million smartphones and 2 million notebooks annually, with plans to expand to 60 million smartphones, 2 million LED TVs, and 1 million automotive units. This initiative is expected to yield higher double-digit margins. Furthermore, Dixon acquired a 51% stake in Q Tech India to manufacture camera and fingerprint modules, projecting a substantial increase in volumes and revenues in the coming years.

In the telecom sector, Dixon has secured a significant order from a leading U.S. Telecom customer for telecom backhaul microwave radios, marking a new phase in its manufacturing journey. This highly complex equipment will cater to both Indian and global demand, with commercial production expected to start by Q4 of the current fiscal year. The company anticipates this segment becoming its second-largest growth driver after mobile. Additionally, a 60:40 joint venture with Inventec Corporation of Taiwan has been finalized for manufacturing notebook PCs, servers, desktop PCs, and components, expected to be operational by Q1 of the next fiscal year.

Outlook and Future Trajectory

Management remains optimistic about Dixon's medium to long-term prospects, projecting mobile volumes to reach 55-60 million units next year. The IT business is targeted to achieve INR 4,000-5,000 crores in revenue within the next two years, while Q Tech India is expected to see double-digit growth this year. The company has set an ambitious target of achieving INR 1 lakh crore in sales within the next three to four years, with an EBITDA margin of 4-4.5%. This growth will be fueled by continuous capacity expansion, deepening manufacturing levels, and strategic diversification into higher-margin component businesses.

Dixon's disciplined capital allocation, evidenced by its 20x revenue growth since 2017 without external capital, reinforces investor confidence. The company's strategic focus on backward integration, new product categories, and global market expansion positions it strongly to leverage the growing Indian electronics manufacturing ecosystem and deliver sustained value.