Dixon, Syrma clock revenue jump while chip costs rose
Contract electronics makers Dixon Technologies India Ltd and Syrma SGS Technology Ltd reported much higher second-quarter revenue. However, while Syrma, the smaller of the two, saw its profit double, Dixon’s profit fell without the one-time gain in the previous period, and higher working capital burden.
Dixon’s total revenue from operations rose 47% from the same period last year to ₹21,794 crore, and 40% from the previous quarter. Net profit fell 45% to ₹411 crore, mainly due to accounting: Dixon recorded a fair-value gain of ₹57 crore on its stake in Aditya Infotech, compared to ₹465 crore a year earlier. Excluding that gain and a ₹28 crore profit from selling its lighting business last year, adjusted net profit rose 11% to ₹360 crore and 32% from the previous quarter.
Chennai-headquartered Syrma SGS, in contrast, reported its highest-ever quarterly revenue and profit. Revenue from operations rose 74% to ₹1,990 crore, and 25% sequentially. Net profit jumped 87% to ₹124 crore, and up 17% sequentially.
Still, both companies beat analysts' expectations on revenue and profit. A Bloomberg poll of 14 analysts expected Dixon to report ₹19,208 crore in revenue and ₹287 crore in profit. Analysts polled by Bloomberg estimated Syrma to post ₹1,688.3 crore in revenue and ₹102.1 crore in net profit.
Management of Dixon remained sanguine.
“There’s nothing weird or unusual here—the two increases are proportionate. There is a pass-through in costs that we are seeing due to high component prices. But, that hasn’t diminished demand—we’re seeing the overall global demand for electronics stay strong,” Atul Lal, managing director of the Noida-based Dixon, said in a post-earnings call.
In a post-earnings interview with Mint, Jasbir Singh Gujral, managing director of Syrma SGS, said the company continues to see strong demand across all its verticals.
“Whatever we had guided for, we are firmly on track to achieve. Automotive and IT shipments are up significantly, showing demand despite cost pressures. From what we are seeing, we expect another six months before the cost pressures and supply chain shortages ease up. But, before that, what we managed to earn in the first half of this fiscal is already equal to or more than what we did in all of FY25,” he added.
Both Dixon and Syrma SGS announced their earnings after markets closed Friday. Dixon’s shares closed at ₹11,000, down 4.25%. Syrma SGS closed at ₹1,625.30, down 2.6%.
Dixon’s operating profit margin, excluding other income, dropped to 2.7% from 3.8% as material costs rose to 94.9% of revenue. The mobile and EMS division, now 92% of sales, grew 50% to ₹20,093 crore, but its segmental profit margin fell to 2.5% from 3.5%.
Syrma’s operating profit margin fell to 9.7% from 10.1% a year ago and 10.2% in the June quarter, as material costs increased to 78.9% of revenue from 75.5%. Despite the margin hit due to higher costs, Syrma’s varied verticals grew: In the July-September quarter, automotive revenue rose 91%, industrials 86%, and IT and railways 69%.
For now, Dixon is focusing on growing its low-profit phone assembly business, while Syrma’s varied business mix is helping it keep close to 10% profit. However, Dixon’s management said it is increasing contract manufacturing of laptops and tablets as part of its diversification plan.
“By the next fiscal, we expect to generate up to ₹20,000 crore annually from IT hardware as well. With the sector also holding scope for production-linked incentives, this gives us good scope for steady margin addition as well,” Lal told analysts.
Dixon’s approach to scale up in laptop and IT hardware business was reflected in Gujral’s comments.
“This (IT hardware) is a steady sector, with ample revenue growth opportunities. There is unlikely to be a pricing war because of rising competition, even if other parties increase efforts. We remain in talks to qualify for PLI benefits—our PCB project remains on track for early next fiscal, and we’re in talks to identify the right partner for motherboard manufacturing locally,” Gujral told Mint.
Industry analysts said both results showed strong fundamentals, in a difficult business environment.
“Both Dixon and Syrma SGS have showed resilient growth at a time when costs have risen, proving that they have strong clients that they are unlikely to lose abruptly. This shows strength for the long run, and the forward-looking commentary on IT hardware proves that both the firms have enough cash to diversify and expand to tap new opportunities,” said Harshit Kapadia, vice-president at brokerage firm, Elara Capital.
Shouvik has been tracking the rise and shifts of India’s technology ecosystem for over a decade, across print, broadcast and web-first platforms. He's been a tinkerer of machines and PCs since childhood, a habit he was thrilled to convert into his profession. This has led him to fascinating experiences of technologies around the world, which is what keeps him hooked to his job.<br><br>Shouvik likes to believe that he is one of the few technology journalists in India who can also code. He has also been writing about the rise of AI well before it became a household name, and has met some of the most fascinating people over the years through his work.<br><br>Shouvik writes about AI, Big Tech, data centres, electronics, semiconductors, cybersecurity, gaming, cryptocurrencies, and consumer technologies. He is most fond of the stories he has written during his time here at Mint, for which he also writes 'Transformer', a weekly technology newsletter, and hosts 'Techcetra', a weekly technology podcast.<br><br>Outside of work, Shouvik spends most of his time with Pixel, whom he believes is the world's best dog. He is also an avid reader, a toy collector, a gamer and a frequent traveller.
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