Ladies and gentlemen, good day, and welcome to Dixon Technologies Q1 FY 2024 earnings conference call hosted by DAM Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Bhoomika Nair from DAM Capital Advisors Limited. Thank you, and over to you, ma'am.
Yeah, thanks. Good evening, everyone, welcome to the Q1 FY24 earnings call of Dixon Technologies. We have the management today, being represented by Mr. Atul Lall, Managing Director and Vice Chairman, and Mr. Saurabh Gupta, Chief Financial Officer. At this point, I'd like to hand over the call to Mr. Atul 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 B. Lall, and we also have on the call today our CFO, Saurabh Gupta.
Good evening, everybody.
Thank you very much for joining these earnings calls for the quarter ending June 2023. Coming to our overall performance for the first quarter, consolidated revenues for the quarter ended June 2023 was INR 3,274 crores, against INR 2,855 crores in the same period last year, which is a growth of 15%. Consolidated EBITDA for the quarter was INR 135 crores, against INR 101 crores in the same period last year, which is a growth of 34%. Consolidated PAT for the quarter was INR 57 crores, against INR 45 crores in the same period last year, which is a growth of 28%.
These focus in IFIN, in a fairly challenging operating environment, helped deliver strong earnings and 60 basis points improvement on EBITDA margins year-on-year, led by operating leverage, cost optimization, and efficiency measures across all businesses, also continued implementation of strategic price hikes across OT businesses, both in washing machine and lighting. Financial position continues to remain very healthy, with gross debt to equity at 0.14x. Our basic approach to capital policy always has been to maximize the return on invested capital and financial flexibility. Our ROCE and ROE in the last quarter was 22.4% and 23.1%, respectively, as on June 2023. We remain confident the same will keep improving in the upcoming quarters and years on account of good earnings and working capital efficiency.
Looking ahead, we see that we have a platform to sustain an extremely strong revenue growth moving forward, with a strengthening in the overall demand environment and also our balance sheet, and most importantly, new customer acquisitions getting into new domains. I will take you through the performance and the strategies in each of the segments going forward. Consumer electronics. Revenues for the quarter were INR 882 crore, with operating profit of INR 30 crore and 3.4% operating margin. Operating profit margin expanded by 70 basis points year-on-year on account of operating leverage and continuous focus on backward integration and also increasing the OT share in our revenues.
Revenues are 5% lower year-on-year, as Q1 of FY 2023 in this segment also included INR 71 crore contribution from our AC inverter control board business, which has subsequently been transferred to our JV with a Japanese company, Rexxam. Excluding that, the revenues in this business have been flat. We are on the way to roll out our Android-based solutions from Google by Q2 of the current financial year, and also we went into partnership with Samsung for their Tizen operating system, which will be rolled out in Q3 of the current financial year. As shared in the last call, we have now started our backward integration in convection molding, and the commercial production has already started. Further investments in the LED bar segment is on line, and we hope to start manufacturing LED bars for internal consumption sometime in Q3 of the current fiscal.
We are also exploring new product range, that is, commercial displays, which are used in public advertisements and information displays, and also interactive boards are used in education institutes and offices. We feel that we should be able to roll them out by Q4 of this financial year. We already have some initial orders in this particular product category. Lighting. Revenue for the quarter was INR 222 crores, with an operating profit of INR 19 crores and an operating margin of 8.7%, which is an expansion of 150 basis points year-on-year, achieved through combination of reduction in input prices, product mix, and volume engineering, and significant initiatives in sourcing.
Apart from sluggish consumer demand, the reason for the lower revenue year-on-year are high reduction in pricing due to drop in commodity prices, and also migration of LED bulbs technology from driver-based to DOB, that driver on board, which are priced approximately 25% lower. As LED bulbs are the single largest category in lighting, it had an impact on our revenue growth. We have initiated aggressive new product introduction in last three quarters, and we continue the momentum with the launch of street light global lighting in Q2. This has already happened, the commercial orders have come to us. We are working on professional lighting solutions, which should happen by Q4 of the current financial. Smart lighting products are ready for commercial launch based on Bluetooth mesh technology by Q3 of the current financial.
After getting export orders from the new customer in UAE between three and Q4 of 2022, 2023, we have received more export orders from Germany, which will be executed in Q2 of the current fiscal. We are also in advanced level discussions with potential customers both in U.S. and U.K. In data center investments in 2022, 2023 under the CLSC for LED lighting components in line with our backward integration strategy, which will make us more cost competitive. The new plant for LED lighting component in Bangalore has already started commercial production in May 2023. The capital employed in this business has been reduced by INR 188 crores year-on-year on account of huge focus on working capital management, which is resulting in improvement in ROC to 36% from 22% a year ago.
On appliances, the revenue for the quarter was INR 279 crores, have an operating profit of INR 28 crores, with expansion in profit margins to 11%. This is mainly by increases in prices, improved operating leverage, and cost optimization measures. The ROC in this business also improved 20% from 25% a year ago. A new state-of-the-art semi-automatic washing machine will be operational in a couple of weeks from now. In line with our backward integration strategy, we have set up our own tool room for in-house tool manufacturing, which is already operational. In our fully automatic top loading business, we've added Voltas Beko now as another anchor customer apart from Bosch. Supplies to Voltas Beko for fully automatic top loading have already started, and we have also expanded our customer base, including Lloyd, Reliance, and Panasonic in 58 W category.
These products to these customers are going to be launched sometime in Q3 of the current fiscal. We're investing intensely on this segment, more on R&D, and we feel this growth is going to be extremely healthy in this particular business. Mobile phones and OEM activity. The revenue for this quarter was INR 1,705 crores, a growth of 38% year-on-year, with operating profit of INR 63 crores, a growth of 61%, with an expansion of operating profit margin of 40 basis points to 9%. We have got increased order book from Motorola for 1.3 million-1.5 million smartphones in Q2, as against 1 million in Q1. We expect the volumes to increase to 2 million a quarter, including some large export orders from Q3 of the current fiscal.
The large piece in this business is a new customer acquisition in mobile category, which I am sharing. One, we have acquired Transsion Group, which is the owner of Itel phones, smartphones, and feature phones, which is the fifth largest brand in India. We've already commenced production for Itel for feature phones, which is approximately 1 million per month. From the month of September, we start production for their smartphones, which is going to be almost 0.8 million to 1 million smartphones a month. Our production for Xiaomi for the smartphones is all ready to start sometime in September or early October of this year. Another highlight of our recent quarter is securing a large order of Jio Bharat Phone from Reliance Jio. We've got an order for 15 million units. We've already delivered 1 million units. This business looks very healthy.
It's almost a INR 1,500 crore business for us in the current fiscal. Commercial production has already started. This is going to be our major growth area, which we have been talking about earlier also. In order to meet increased demand of our customers and gain a large market share, we have leased a large 2.2 lakh sq ft facility in Noida, in addition to our existing three facilities, and is expected to commence production sometime in mid-August, next month. As we move forward, the next phase of growth remains focused on manufacturing excellence, quality, efficiency, and customer satisfaction. Telecommunications working product and new segment for the quarter ended with INR 102 crore. Our new facility in Noida got operational in January, is now getting stabilized, and we have an extremely healthy order book from Airtel.
We have got a large order of AC type of set-top boxes and also indoor set-top boxes, which is expected to start production in Q2 of the current fiscal. We also got a large order from Jio for internet-based set-top boxes, which will production in Q3 of the current fiscal year, and also 5G CPE devices, which also will start production from Q4 of the current fiscal year. In this, we are also a beneficiary of PLI. We have already achieved the thresholds of both the picks and minimum revenue in the first year, and we filed our intermediate claims with the government. We are also in active discussions with some very large global brands for existing and new product categories and building a team of doing R&D for both servicing the domestic market and the global markets. Laptops and tablets, IT hardware products.
Revenue for this segment was INR 18 crores. The government has recently announced a revised PLI scheme for IT hardware products, with a higher intensity payout, which definitely be part of IT. Recently, we have entered customer engagements. We are in advanced stages of discussions with some very, very large global brands. We're very hopeful that these discussions are going to be positive, and it's going to be turn into good business. The reference and wearables, wherein we have partnered with both, this, in this segment, the revenues were INR 109 crores. We have an extremely healthy order book and now we're dropping a monthly rate of almost 2 million devices per month. Recently, we have placed order on mass communication SKUs of all these smart watches, for which the new line is being set up, and we get operational in another couple of months.
We're targeting to almost double our 50% share in revenues with healthy operating margins and superior risk in this business. As a part of our backward integration strategy, we'll start by entering into PCBA in the current financial year. Security surveillance, we have 60% of shares of revenue from the including growth. We have expanded our capacity from 10 million per annum to 14 million per annum, add two new tool labs were being facilitated to boost this, which are operational on May 15, the current fiscal. Operating profit margins in this vertical have come down, mainly due to shifting expenses and the new cost structure that it will get optimized in a quarter or so. Our JV with Rexxam, where we manufacture the inverter control of both Rexxam. In this JV, we achieved around INR 9 crores.
The revenue potential in this business is huge because we've now also got an export opportunity of this particular SKU from Europe and also from Latin America. In this business also, we have achieved the fixed and continuing thresholds of PLI, and the claims are being filed. Refrigerators, the construction is underway at the new 20-acre facility in Greater Noida for 1.2 million direct cool refrigerators. This is in the product categories of 190 l-235 l, and we are expecting to start production, commercial production in Q3 of the current fiscal year, sometime around October. I would like to stop now and look forward to answering your questions. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Dhananjai Bagrodia from ASK Investment Managers Limited.
Hi, sir. Wanted to ask you regarding your margins, Q1 Q across segments, we've seen a margin dip. Any reason for that? Hello?
There's no particular reason, Dhananjai. Basically, if you look at the whole margin profile across four quarters, Q1 is generally slants interest, slightly slower product for the consumer durables business. It's majorly an investment goes into the AC business, the cooler business. It starts to pick up in Q2. Q2 is generally the best quarter for us. Q2 and Q4 are considered as the best quarters for us. Historically also, you will see that Q4 margins would always be higher than the prior margins. There can be a kind of a mix, kind of impact also. In this quarter, we had higher revenues coming in from. Basically, I think this would be the reason.
Okay. Sir, now, as we're seeing in terms of lighting and consumer electronics, consumer electronics, what would have been the reduction in open sales prices?
Year-on-year, if you look at consumer electronics, prices have actually gone up from last year, because the reduction had already started to happen from the first quarter. Last year, we did average semi prices for our entire fiscal year was around INR 11,700, and this quarter we had closed at around INR 12,000. Why it showed a decline? There are two reasons for it. One, last year we had some sales of our AC versions of the board, which also got reflected in the consumer electronics business, which was INR 71 crore. From there onwards, we started to JV with Rexxam, which is now no more there in the, in current Q1 numbers. That's a INR 70 crore- impact. The volumes have been lower.
Q1, our volumes have been lower by almost 11%. As I said, 7.7 lakh TVs that we sold last year, we sold around 7 lakh TVs this year. Majorly it is volume and the impact of the PPC going on there.
Sir, you said volume reduction of 7% year-on-year, right?
7%, yeah.
...How is that shaping up now?
5%, sorry, sir. We showed 7.4 lakh units last month. We actually are 7.1.
sir, lighting? Sorry, regarding that option.
Lighting, there are two reasons. One, of course, there has been a big, as mentioned by Mr. Rahl in his remarks, there's been a big value erosion in our LED bulb. It is almost 65% to 70% of the portfolio today, and there has been a value erosion of almost 45%. Overall, there has been market has been very slow as far as the lighting and lighting products are concerned. These two are major reasons why our revenues get lower in lighting.
Okay, thank you.
Thank you. The next question comes from the line of Rahul Gajare from Haitong Securities. Please go ahead.
Yeah. Thank you for the opportunity. I have two questions. You know, first, on your mobile phone. Now, after your recent tie-up with Xiaomi, could you discuss the roadmap for manufacturing for Xiaomi in terms of, you know, the volume that you're expecting? You know, the kind of CapEx that you might have to do for this particular tie-up. Also, if you can talk about, you know, if there is any discussion with manufacturing of, you know, the Google Pixel phone also, given that they also want manufacturing. That's my first question.
On Xiaomi side, the manufacturing creation and infrastructure set up is on. The teams have been sent location. The IT infrastructure has been set up, and our target is to start production sometime in mid-September. I think it's going to start in a couple of weeks time. The initial plan is to reach up to a production level of 500,000 per month. That's what we have planned for. Then step by step, it's going to be scaled up, in the next phase, to almost 1 million. On the second question, when you're talking about Google Pixels, there are certain confidentiality clauses, and I'm extremely sorry, it's difficult to share the details of that. Yeah. Okay. Xiaomi, that is the roadmap.
Okay, great. When you said you want to ramp up from 10.5 million per month to 1 million, how much time will this ramp up take you?
There is no timeline being pulled out on that. It is on the execution of phase one, which is 0.5 million. I think that it's going to take around eight months to a year to ramp it up to the next phase of 1 million.
Okay. Continuing with this mobile phone question. In this particular quarter, you know, if you were to remove the variable set of Telkom, the growth of mobile has been only about 6%. Could you throw some light on that? Thank you.
Let me say, the Motorola production has been kind of flat. It's 1 million units. In the other mobile segment, the significant increase has come mainly in the feature phone side. The second quarter, the current quarter, the order book of Motorola is much higher. We are targeting almost 1.2 million-1.4 million. A bulk of Jio Bharat production, and also the Itel feature phone production will increase the numbers, and the numbers will significantly go up from two, three, because the Motorola production increases, the Itel production increases, Xiaomi's production come into play, and also Jio Bharat's production come into play. Nokia, the present running rate, run rate is almost 1 million phones a month. It's going to go up to almost 1.4 million-1.5 million.
My last question is on the refrigerator. You did touch upon some aspects of the refrigerator. Maybe I missed some of those things on the refrigerator plan. In terms of, you know, the CapEx capacity, the impact or the project ROI that you have in mind on the refrigerator business in terms.
We are making our CapEx of almost INR 44 million. We are creating a capacity of 1.2 million DC refrigerators, which is a capacity of 190 l-135 l. The commercial production is going to start sometime in the October, December quarter. We already have certain committed offtake from certain large brands. We're getting into strategic relationships. The payback period for this business is going to be four years. The ROC we are targeting with an OEM business is going to be 15%+.
Thank you very much.
Thank you. The next question comes from the line of Aditya Bhartia from Investec. Please go ahead.
Hi, good evening, sir.
My question is on the opportunity from Itel. How large is the opportunity between 0.8 million-1 million units per month? Sounds like a very large number. Are you going to do some assembly of the mobile phones, including PCB assembly, or is it going to be more of a problem?
It's computer template, okay? You know that Itel is the largest manufacturer of PC phones in India. Largely, 100% of the PC phones and also the smartphone they're going to be launching next year. It's a very large facility, somewhere in the range of around 5,000 phones.
I would say if you look at the last in the March, announcements last effective PPP, they delivered the revenues of almost 6,500 phones. That is the opportunity pool that we have.
Sure. almost entirely everything is going to be done by Dixon?
That's what we are aspiring for. It's going to be in phases, but that's what we are aspiring for, and that is the capacity we are building, on it.
Understood. Understood. Itel is not the second customer that we were aiming for, that's something else?
There's the second customer.
Xiaomi and Itel were the two customers that we are talking about, in large numbers now?
That's right.
Okay, understood. Understood. My second question is on the lighting business. Mering has been targeting to grow downlighters business for the last few quarters, but it appears that we are not really seeing a major success out there. I just wanted to understand, what are the constraints? Because I would have thought these are similar customers, and this would ramp up could have been faster.
Well, okay, customer recognition in any SKU, even if it's your existing customer, it takes some time. Please be rest assured we are seeing the magic, and it's going to happen, and we're getting a positive traction. It's going to take some time, but step by step, we are moving towards it. I agree with you that we are a bit slow, but we are confident about it. The team is extremely sure about it. We are getting a very good response from the SKUs that we have launched. It will happen, but take it slowly.
Understood. Understood. Also, the export opportunity, sir, because you spoke about some contracts from Germany and possibly later from U.S. and U.K. How are you looking at it? How large could it be for this year and maybe from two to three years, et cetera?
With Germany, we are already under execution. U.S., U.K., it's in advanced stages of discussion, we are confident. At this stage, to give a number to it, I think it would be slightly premature. We are, I'll say.
Understood. Understood. How large should be assume export opportunity for this year and from a three-year perspective?
In the current financial, it is going to be a small opportunity, but if we are able to get breakthroughs, which we are fairly confident about, both in Europe and US, it can be a large opportunity, which can be turned into a $200 million business in a couple of years.
Sure. Okay. Thank you. Thank you so much.
Thank you. The next question comes from the line of Natasha Jain, from Nirmal Bang. Please go ahead.
Hi, sir. My first question is on the Xiaomi onboarding. You have onboarded that client for mobile phones, but I've also noticed that one of your competitors has seen, wallet share from Xiaomi decrease, while yours has increased. I want to understand, at an EMS level, is it just a broader diversification that the players do, or are you offering some favorable terms that have led to this shift from one of your competitors to your books?
I think it's a combination of very many things. It's a combination, of course, of a better commercial case, and also between capability and delivery. It's a combination of both things which leads to such moves.
All right. Sir, my second question from the Xiaomi TV segment. Can you just give us any growth expectations there? Has the budgeting been done for this year?
has been slow. There is Xiaomi. We expect this year to close at somewhere around 0.8 to 0.9 million of almost 5%. Xiaomi's overall TV business, there has been a slowdown.
All right. Sir, my last question is, since you must have done your annual budgeting, by now for your segments, so can you just give us a broad guidance for your FY24 numbers? Also, if you could give segment-wise volume data for this quarter, if that's possible.
As far as the revenue is concerned, we don't want to give any guidance. Please be rest assured, it will be an extremely good growth much ahead of industry growth. On the volume side, I'll request Saurabh to share these numbers.
From the volume side, of course, we don't want to give any numbers, but clearly a lot of things have changed positively for us, especially on the mobile business, so things are looking positive. I'll check the volume number. On TV side, as I mentioned, we did a volume of around 7.4 lakhs as against 7.1 lakhs last year. 7.1 lakhs this quarter as against 7.4 lakhs. We, the semi-automatic washing machine, did around volumes of around 3.9 lakhs, which is a growth of 10% against same period last year. Last year, we did around 3.5 lakhs. Fully automatic was broadly flat. There's small decrease in fully automatic washing machine, but we have a very strong order book now with volumes coming on board.
Smartphones, we have a growth outside of Samsung smartphones. The other smartphones, we had a growth of 3%. We did almost 11 lakh smartphones. We did almost 13 lakh smartphones as against 8.5 lakh smartphones. In case of Samsung specifically, we did almost 40 lakh smartphones, similar to last year. Then the TV, the CCTV, DVR, we had a volumes of almost 90 odd lakhs. There are smaller numbers of set-top box. TWS, which is the wearable segment, part of the TV is around 37 lakhs.
All right. Thank you, Saurabh, sir.
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Ankur from HDFC Life. Please go ahead.
Thanks, as always, for your time. Starting off, in terms of the overall, demand environment itself, you know, especially in case of TVs, lighting, home appliances, like a flat washing machine, you know, obviously, like, kind of some soft quarter for us. Clearly, how are you seeing, you know, the overall industry and also, you know, your order books as we get into festive, maybe a couple of months down? You know, what is the feedback you're getting from some of your key customers there?
Ankur, it's a mixed kind of a bag. Now, in the categories of television.
Mm-hmm.
The demand is flattened. Similarly, in lighting, the demand is flattened. There is some uptick around the forecasting through holiday season.
Mm-hmm.
It's still flatted. In washing machines, in our case, both in semi-automatic and in fully automatic, the order book is extremely healthy. In the case of mobile phones, I shared just now, the order book in our case is extremely healthy, but as far as... This is mainly because of new customer acquisitions.
Sure. Sure.
Increasing volumes for both Motorola and Nokia. The sense that you get from our customers, with the marketplace, there has been some uptick, but it's still the demand is complete. One category in which there is an extremely good demand is that of wearable devices.
Mm.
Therefore, order book is extremely healthy, and we have in fact ramped up our capacities to almost 1.7 million devices a month.
Mm.
Year back, we were barely at INR 0.6 million, INR 0.7 million. A mixed kind of a bag. In case of CCTV and DVR, again, the order book looks healthy.
Mm.
To summarize, in some of the core categories, like TVs and lighting, it's subdued.
Mm.
In washing machine, our order book is very healthy. Mobile is very healthy.
Yeah.
CCTV is good, and also the hair removal, wearable. This is the kind of situation.
Sir, on the volume growth target for this, I think you mentioned a number which I missed, and the voice wasn't very clear on TVs. What is the growth number or the absolute volumes you're looking at for this year in TV?
We did INR 3.4 million in the last financial year.
Yeah.
In our TV budgets, we have taken a number of INR 0.3 million, INR 0.7 million. We have done, almost INR 0.7 million, and the order book looks better, but let's see. One is keeping the fingers crossed. It depends how the festive season goes.
It depends on this quarter too, Ankur. That will determine what number we close at.
Sure.
In this Diwali, on 17th of November, it is like a eight.
Mm.
In the Q3 also show the market is sustained.
Right. Sir, I remember last quarter's guide, you spoke about monitors also becoming a fairly large, you know, opportunity. Is there anything to report there? Is the scale-up happening on that front?
Monitors for Dell, and the commercial version is happening.
Mm.
Everything produced in India, with exception for Dell, is largely for the government buying.
Mm.
There, the order book is very moderate.
I understand. Okay, just one last question. So the IT hardware clear by, right? I understand, you know,
They're still under discussion and getting finalized. Which are the specific areas we would be targeting on the IT PLI floor?
We are in discussions with, some large global brands.
Mm-hmm.
As far as the broad categories are concerned, we are focusing mainly on notebooks.
Mm-hmm.
With that would also come the desktops and also the tablets. The main production is going to happen on notebooks.
Okay, great. I'm very happy. Thank you. All the best.
Thank you. The next question comes from the line of Dhruv Jain from Ambit Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. You know, now that you've signed multiple customers who might want settlement, just wanted to understand which customer would be in the ambit of PLI scheme and which would not be?
Dhruv, everything will be part of the PLI scheme except for the Samsung smartphone business that we do. Apart from that, everything falls under the PLI.
Okay. Just a clarification on the consumer electronics business. We see a sequential decline in the OEM share. Is it seasonal or, you know, something changed?
Sir, here only the number of OEM have gone up, the percentage of OEM has gone up. If you are talking from quarter four, yes, it did show a decline, but I think it's only a phenomenon this quarter. As we start to roll out our solutions both on Android and also on Tizen, Samsung operating systems, I think so the numbers will start to go up. This year we are expecting that this year the number should be about 30% at an annual level, but once we start. By Q2, Q3, it should start reflecting those kind of numbers. In TV business, the maximum growth is going to come in our case from our OEM business.
Okay, sir. Just one clarification on this new retail business that you guys have won. Just wanted to understand, what is the quantum of smartphone volume in that, apart from the feature phone volume that you spoke about earlier?
Xiaomi is completely smartphones.
No, I was talking about Itel, yeah.
Itel, the smartphone volume should be, it should be in the range of 0.7-0.8 million a month.
Okay, sir. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Kshitiz from MS. Please go ahead.
Yes, sir, thanks for the opportunity. Just a couple of things. Wanted to understand your mobile revenue guidance for the year. Sorry, my line was a little darn. For the full year, are you planning the same INR 8,000 odd crores for this year?
We don't give any specific guidance for mobile as a vertical, but it'll be the largest piece of growth for us. Also, please appreciate that the manufacturing has just started, and any ramp-up, it takes some time. It undoubtedly will be the largest driver for us, and it's a larger opportunity in operate also.
Okay. Can you comment on Xiaomi's volumes that you will be doing typically for this year, whenever you start doing it, with the annual volumes for Xiaomi? Because they've been losing market share, given the regulatory issues that they had. I don't know if the worst is behind, but just wanted to understand how much volumes they're committing to us.
As I had shared in response to earlier question, that initially we're starting off with 500,000 a month, and we see that increasing with time to 0.8 million to 1 million a month. However, that's linked to our execution. That's our roadmap.
Last one for Saurabh is just on CapEx. You've incurred about INR 10 crore odd this quarter. Should we assume an INR 400+ crore kind of CapEx this year, or if you have any specific number to share? Any breakdown will be helpful.
Yeah, that would be the number. Around INR 400 crore-INR 420 crore should be the number that we are looking for this year. That will be the CapEx that will go into, one, into the mobile for expansion, for a new customer with Itel and Xiaomi. Second, on the refrigerator project. Third, we are also constructing an NGB operational, the model only, facility, new automation facility for semi-automatic. There, whatever comes into play under the PLI, for IT hardware, for telecom, those are there.
Thank you so much.
Thank you. The next question comes from the line of Bhoomika Nair. Please go ahead.
Yes, sir. Just wanted to, you know, check on lighting. You just mentioned that, you know, the market has been quite slow and weak. We just wanted to get a sense in, you know, what is the outlook, because, you know, is the pricing erosion still continuing? How is the volume growth that we are looking at? If you could just first talk about this aspect and then I'll get into the other aspects of the lighting segment.
Bhoomika, as Saurabh had shared. One, the market has undoubtedly been very subdued on the consumer lighting side. The demand has been extremely under pressure, particularly for the SKUs, like LED bulbs and buttons, in which are the largest contributors to our revenues in lighting. The second is because of migration and technology, particularly on the LED bulb side, from driver to COB base. There has been a price erosion to the extent of almost 30%. The unit value is also eroding. These two combined have led to an impact on the lighting business for the industry, and so is the case for Dixon. What is the way forward? The market trend is shifting more towards the downlighters and lights, and that's what we are gearing up for.
Also, we have launched a new product category, which is having a significant traction in the market, of ropes and strips that have been commercially launched. We feel that that can be almost 80%-90% growth business for us in the coming quarters. 80%-90% growth on annualized basis.
Right.
Large leads in the Dixon product portfolio, and we have built out in the professional side. We have a strength in our R&D, particularly with Kunal, who was heading Philips R&D, coming in and heading our R&D. Those product launches are being planned. We have planned with one called acquisition of the smart lighting design company, Ibahn, which has already been operationalized, which is based on Bluetooth mesh technology. Those products have also been prepared and commercially launched in 2024. These are the action items which hopefully will get the lighting business back on track. On the other side, we have consolidated our footprint. We are a part of a PLI, for which the ratios, both on investments and revenues, have been met, and that will expand our margins.
We have expanded our margins as compared to last year by almost 110 basis points. We are really focused on capital efficiency, and the ROC has significantly improved in the business to 30%+ . We're managing the current debt very well. We have reduced almost INR 140 crores in our business. These are the initiatives taking, and this is the path we are pursuing.
Sure, sir. This ropes and strips and professional lighting, you know, how large is the market size? What can it be? You know, clearly, traditionally, LED, as you said, is under tremendous pressure, but these new segments can become how large is our addressable market sector? If you can just throw some light on that aspect. Lastly, on the, you know, you spoke about some trial orders in Germany, et cetera. How large are these orders currently, and what can they potentially scale up to in a period of two to three years?
We feel that the strip and lighting business, strip and rope business can add to our top line almost INR 5 crore-INR 6 crore to start with, and then it can scale up. On the professional lighting side, we appreciate almost 40% of the Indian lighting industry is on the professional side. That's what we are getting into. That was a complete miss out in Dixon's product portfolio. It's going to be slightly slow, but we hope to launch these products sometime in two, quarter of this financial year. That's a big, big opportunity, but it's going to be scaled up step by step. On the export front, the Germany trial orders are in the process of getting executed. We feel that both European and American opportunity in a couple of years can be an INR 100 crore business.
Sure, sure. Great, sir. I'll come back with the questions. Thank you so much.
Thank you. The next question comes from the line of Abhishek from DSP. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, if you can just talk about the competitive intensity, mostly in the TV and lighting segment, in terms of how is the competitive landscape? Is it deteriorating, improving, stable? Just your thoughts, that will be helpful, sir.
When we're looking at TV, have we lost any market share? Has there been any significant customer shift from our side to competition?
No, that has not happened. There has been some competitive intensity in TV because of a multinational entity setting up and investing in India. No, has it had any significant gain from our business? No. That's about the. When we are looking at lighting, definitely the competitive intensity has increased. There are a couple of players, who have indeed good brands, which might have had a small impact on our market share. Not so much on the bulb side, but on tube light areas. That was sales.
Okay, sir. Sir, the other thing is, you know, what is the broad utilization where your new factories are? because in the last 18 months, you've done a lot of CapEx. How should one see the impact of operating leverage as you scale up revenues from this into INR 12,000 crore of topline in FY23? When you scale up, how should one see the impact of operating leverage into the margin profile, if you can just help us with that, sir?
If you see, across all our businesses, the margin profile has improved, and it is primarily because of risk coming up and generating and operating the place, and also migrating to more and more roadways, and also the backward integration piece. You will see that in the case of washing machines, at some point of time, we've come down to around 10%. We've been able to restore it to 11%. Partially, it's because of value engineering and also scale. Now with new factory becoming operational, we feel it's going to add up to our operating leverage capability. In televisions, we generate an ROC of 100%+ . We manage the gross box very, very well, and manage capital efficiently, very, very well. Now, backward integration pieces are going to be operationalized.
One is the injection molding plant has already become operational, is going to help us improve on our margins. Secondly, the LED bar, that is also an important input into a television, is also going to get operationalized in Q3 of the current fiscal. It helps us in further improving the margins in this business. Definitely, the largest piece in our business is the mobile opportunity, and it's going to be scaled up to a very different level. That kind of scale coming up, operating leverage. Initially, it's going to take some time, possibly a couple of quarters, to really ramp up. It takes some time to stabilize, but I feel the operating leverage will begin from Q4. In the case of wearables and wearables variant, we've upped the production from around 0.6, 0.7 million pieces, and this current one will be 0.7 million pieces.
You'll see that getting reflected in our numbers for current quarter. That's the situation.
Just one last question from my side on the Xiaomi bit of fate. In terms of, you know, the whole protocol of getting the product approved and other things, are those processes simultaneously going on, or once the capacity comes in, then it happens, and then will they ramp up? If you can just help us with the sequence of events.
We are at a very advanced stage of execution, and the target date for launching commercial production is September. Likely, it's a tough call, but that's what we are targeting.
To answer your question, Abhishek, all those processes are going on currently.
Sorry, sir, your voice is not clear.
I'm saying all those processes, some of them have been concluded also, some of them are going on currently.
Okay. Okay, sir. Got it, wish you all the best. Thank you so much. Thanks.
Thank you. The next question comes from the line of Rahul Gajare from Haitong Securities. Please go ahead.
Sir, thanks for the follow-up. You know, building on the earlier question, you know, with respect to Itel, you know, which is a new client that you signed up. Can you discuss who was manufacturing for Itel earlier? Since you are talking about, you know, starting with a volume of, you know, 0.7 to 0.8, do you see Itel becoming, you know, bigger than Xiaomi, you know, over time for Dixon? That's the first question.
Presently, it's being manufacturing. It's going to be outsourcing of course to us. Responding to the first part of the question.
Okay, sure. Right.
which one is going to be larger? Only time will tell. We won't volunteer the answer yet.
Okay. Also, with respect to, you know, the total mobile revenue, you know, almost INR 6,500 crore, how do you break this up into, you know, the smartphones and the feature phone? That's the last question. Thank you.
Almost 80%-85% of the revenues are going to come from the smartphone.
The average selling price for a feature phone would be somewhere in the range of INR 500 to INR 25 to INR 300 number. Significant portion would still come from smartphones.
Almost 80%-85% of the mobile revenue will come from the smartphones.
Okay. Fine. Thank you very much. It's very helpful.
Thank you. The next question comes from the line of Alok Deshpande from Nuvama Institutional Equities. Please go ahead.
Yeah. Good evening, gentlemen. Thanks for taking my question. First question on the mobile production ramp-up that the roadmap that we have for the next 12, 18 months. I just wanted to understand the new production that will come, while I understand there'll be operating leverage, but just wanted to understand whether, given it's a very large size complex and multiple complex, will it be at similar margins as the current margins or lower margins, higher margins? Any color that you can give on that?
The margin profile of the business will be somewhere in the range of 2.3%-2.7%, something like that.
Okay. This is at EBITDA margins, you mean?
In this, there will be no working capital intensity in this case.
Understood. My second question is, do you have any plans of getting into manufacturing of, you know, medical equipment, et cetera? Since everything is going away from the engineering industry.
Not at the moment. Okay, sure. Thanks, thanks and all the best.
Thank you. The next question comes from the line of Natasha Jain from Nirmal Bang. Please go ahead.
Sir, thanks for the follow-up. I just wanted to understand a little more on the refrigerator segment. Assuming that it starts from quarter three for this fiscal, and since you've already started putting up the CapEx, you must be in talks with certain players. Can you give us a sense as to how the ramp-up will happen here? What kind of volumes can we expect this year?
Natasha, the commercial production, we are targeting in quarter of October, December. Please appreciate, refrigerators are complex product. It's Dixon brand product, and that rules because the brands that we are talking to are large, global and Indian brands. It will take some time for the technical approvals to come in. The commercial production will start. To put a number to what volume we'll be doing this year is slightly premature. Finally, what we aspire to do is almost 0.8 million-1 million units in the next financial year.
All right, sir. That was all. Thank you so much.
Thank you. The next question comes from the line of Aditya from Retail. Please go ahead.
Hi, thanks for taking my question. Given the thrust that our government has on conductors and PLIs and so on and so forth, what is your outlook for 50 to 20 people?
Sorry, I didn't understand the question. Can you come again, please?
There has been a fair bit of incentivization from our government, right, in terms of getting more, technical production into our country. These are coming in terms of, you know, creating a more, a better ecosystem for, this kind of, industry, as well as building, you know, PLI incentives. What would be your outlook for 50 to 20 people?
I don't know whether we have understood your question correctly. Are you talking about specifically the semiconductors or you're talking about general PLI?
PLI specifically, as well as the other initiatives taken by the government. You know, I'm talking more from sourcing, having more, you know, ease of loans from sourcing specifically, to boost production in India.
I think that's going to take some time. The government is trying to make the policy, the foundation is being laid only now. For it to start commercial production and how much is from, one of the source within Dixon, it's a very difficult question to answer in this stage. If at all it happens, it will take our time.
What will be your outlook for 50 to 20 people?
We are not giving any guidance, but we just showed the order book that we have, and particularly certain products categories like mobiles, it's going to be fairly aggressive.
Okay. Any numbers you could give in terms of, you know, meetings, high teams?
Sorry?
Any numbers that you could get for meetings or high teams?
We don't want to share any particular numbers. Really, the visibility looks good. It's a large order, which we have mentioned on this call. We don't want to quantify the numbers.
Okay, thank you.
Thank you. The next question comes from the line of Aditya Bhartia from Investec. Please go ahead.
Hi, sir. We just want to confirm, for these new mobile phone customers, you mentioned that the margins are likely to be 2.2%-2.5%?
That's right.
Does this include our share of PLI benefit also?
Yeah, this is on gross basis.
Okay, perfect. Would that also mean that for our existing customers also, there may be a margin reset at a lower level? What I'm trying to understand is it that the technically margin on the mobile phone business will be achieved, that may be around 2.5%-10%.
If you see the margin profile in mobile business, if you take the Samsung business, somewhere has been raising from 1.7%-2.9%. I'm being fairly similar with that's all.
Understood. Understood, sir. We are seeing the pricing and margins are broadly similar to how they've been for the existing business, and we are just putting in some push.
That's right. That's right.
Understood.
Absolutely.
Sure. Thank you.
Thank you. The next question comes from the line of Amar Singhania from Nippon India Asset Management. Please go ahead.
Hi, sir. Thanks for taking my question. My first question is regarding the JV with Tinno Group. If you can share with us how that is panning out, and are we, have we started manufacturing for them? What is the timeline, and are we sticking with that 15 unit growth kind of revenue contribution from Tinno Group once it is completed?
There should be a filer application to government for BIS Phase 3 approval. It's taking time. We have still not got that through. We're waiting for that clearance to happen to start the project.
Okay, any activated timeline for this you can see for the next?
We are working with the government, you know, BIS Phase three is time-taking, and it's slightly complex regulatory, initiative of the government. I think we'll have to wait for some time on this.
Okay. Okay, secondly, just a clarification on Itel business. You mentioned on one of the participant question that earlier we used to manufacture in-house, and now the entire thing has shifted to us. Just wanted to understand, is it only because of the PLI benefit this thing has happened, or there is something else? What will happen to their ODM capacity, are we also looking to acquire those facilities in the due course?
GLI definitely is one of the reasons, and also more and more brands strategically are looking at outsourcing their manufacturing. It's a combination of both the factors. Right. On the second part of your question, yeah, the discussions are on.
Okay. Just one adding up question on that. Their total revenue, which you mentioned was INR 2,500 crore, if you can give some color about how much pieces of more they used to do, and how much of pieces they used to do?
Almost 70% of the revenue is coming from the smartphone business.
Okay. This would be a similar realization than what we are doing for Samsung or Xiaomi?
Okay.
These smartphones are also of a similar realization, what we are doing for Xiaomi and Samsung, or it is a lower-end smartphones?
Samsung is not on a revenue base. It's more on a subscription base. They will go into such kind of agreements. Xiaomi, of course, yeah, it would be broadly or slightly higher as compared to the Itel smartphones.
Okay. Thanks, sir. Thanks a lot. That's it from my side.
Thank you. As there are no further questions, I would now like to hand the conference over to Bhoomika Nair for closing comments.
Yeah. I would like to thank everyone for being on the call and particularly the management for giving us an opportunity and answering all the queries of the participants. Thank you very much, sir. Wish you all the very best.
Thank you very much, Bhoomika, and thanks, ladies and gentlemen, for being on the call. Really appreciate it. Thank you.
Thank you, Bhoomika. Thank you, everybody.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.