Ladies and gentlemen, good day and welcome to the Dixon Technologies India Limited Q2 FY 2023 earnings conference call hosted by Emkay Global Financial Services. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Pulkit Chawla of Emkay Global Financial Services. Thank you, and over to you, sir. Thank you, Seema. Good evening, everyone, and welcome to the Dixon Technologies Q2 FY23 earnings call. I would like to welcome the management and thank them for this opportunity. We have with us today Mr. Atul Lall, Vice Chairman and Managing Director, and Mr. Saurabh Gupta, Chief Financial Officer. Without further delay, I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen. Thanks, very much, Pulkit. Good evening, ladies and gentlemen. This is Atul Lall, and we also have on the call today our CFO, Saurabh Gupta. Yeah, good evening, everyone. Thank you very much for joining this earnings call for the quarter ended September 2023. Coming to our overall performance for the second quarter, consolidated revenues for the quarter ended September 30th, 2023, was INR 3,867 crores against INR 2,804 crores in the same period last year, a growth of 38%. Consolidated EBITDA for the quarter was INR 146 crores against INR 111 crores in the same period last year, a growth of 31%. Consolidated PAT for the quarter was INR 77 crores against INR 63 crores in the same period last year, a growth of 23%. Now I'll share with you the performance and the strategy in each of the businesses going forward. Consumer electronics, the revenues for the quarter were INR 1,501 crores with an EBITDA of INR 43 crores and an operating margin of 2.9%. We have seen a margin expansion of 50 basis points, mainly because of large ODM/JDM business. In this business, there is a volume growth of 54%. However, the revenues look flat on account of the prices of open cell decreasing significantly in the international market. We have the largest capacity in India of 6 million sets, including backward integration in LCM and SMT lines and catering to almost 35%-38% of the Indian requirement. Our JDM business with our anchor customer has shaped up very well, and we are in active discussions with other existing customers to offer ODM/JDM solutions. A significant development in the last quarter was closing on the ODM licensing rights with Google relating to Android and Google TV, which will open up a lot of opportunities for us since almost 65% of the Indian market is on this platform. We should be able to roll out the same by Q1 of the next fiscal. We are also investing in setting up an injection molding plant in this particular category in line with our strategy of deepening the manufacturing and backward integration. This should be operational in Q4 of the current fiscal. Monitors, we have got orders from Dell and the commercial production has already started. We expect the volumes to be around 0.2 million in this particular category. Coming to lighting. Lighting revenues in this quarter was INR 290 crores with an operating profit of INR 24 crores with an operating margin of 8.2%. In margin, there is an expansion by 1% against the Q1 numbers, which is in line with what we have been guiding. The demand in this business is normalizing, led by liquidation of inventory in the channel and reduction in input prices, which will result in improved revenues and profitability in coming quarters. We are India's largest ODM player in lighting and have the largest capacities in various SKUs. In LED bulb, we have capacity of 400 million, which is 45% of the Indian requirement. We already have expanded the annual capacity in battens to 50 million and further in downlighters to almost 18 million. We're getting into new product categories like starting strips and rope lighting, which will be launched by Q4 of the current fiscal. Our first supplies against exports to U.A.E. is being executed in Q3, and we're working on some large RFQs for our anchor customer for U.S. market, and we are confident of winning this business. We are in the process of acquisition of a smart lighting company which is cutting-edge Bluetooth mesh technology and is in the process of development of Wi-Fi-based technology solutions for lighting products. This acquisition we will be closing in the current quarter. New products leveraging this cutting-edge technology will be launched by Q1 of next fiscal. We are in the process of hiring a very senior person in this division as lighting R&D head to further churn out more ODM solutions in different lighting categories. We have also started work on investing under the PLI scheme for LED lighting components in line with our backward integration strategy. We are confident that this capacity of LED lighting components will be set up by Q4 of the current fiscal. The capital employed in this business has been significantly reduced to almost INR 85 crores year-on-year on account of better current assets management. Home appliances. The revenues for the quarter was INR 363 crores with an EBITDA of INR 33 crores, giving 9% operating profit. The margins have improved year-on-year and quarter-on-quarter, led by passing on the impact of commodity cost to the customers, improved operating leverage and cost optimization measures. We have 160-odd models in semi-automatic category, ranging from 6 kg- 4 kg with an annual capacity of 2.4 million, and we achieved the highest ever production of almost INR 1.6 lakh in the month of September. In fully automatic category, we have got a capacity of 0.6 million with 96 variants across 6.5kg-11 kg, with Bosch as our anchor customer. In addition to Bosch, we are also manufacturing for Lloyd and Croma and some other brands. We have already started touching a volume of almost 22k-25k per month. We are also in final stages for getting a large contract with a large Japanese brand in FATL category for both domestic and global markets. We'll be introducing more designs with new features in both semi-automatic and fully automatic category. The order book in this business looks very healthy, and we're looking to add more customers in this particular business. Mobile phones and EMS division. Revenues for the quarter were INR 1,594 crores with an EBITDA of INR 42 crores, 2.7% operating margin. For Motorola, we did 1 million volumes in Q2, and now we are also setting up a line for LCD assembly in line with our strategy for backward integration and to deepen the manufacturing. In addition to Motorola, we are manufacturing smart and feature phones for Nokia and feature phones for Airtel. We are also hopeful of getting more business from Nokia in coming months for both the smart and feature phones for both domestic and global markets. As I have communicated to you in the last call, we are almost close to closing a large order with a couple of brands in mobile and vertical, both for domestic and exports market. I feel fairly confident that the production for these new brands is going to take off in Q4 of the current fiscal. We manufactured 3.3 million and 2.6 million of 2G and 4G phones, respectively, for Samsung in Q2. We have started the construction activity in our new 5-acre integrated mobile facility in Noida. We have also embarked on an ODM journey in mobiles. We have recruited a very senior resource as our R&D head for mobiles, and a new team and a lab will be built in Hyderabad for that. Security surveillance. Dixon's 50% share of revenue for the quarter was INR 118 crores with an EBITDA of INR 3.6 crores at 3.1% operating margin. The order book in this segment looks healthy, and we're going into further capacity expansion from 10 million per annum to 14 million per annum, and we are also relocating our existing footprint from Sri City to Kopparthi in Andhra. In this particular business also, we have also started working on backward integration for mainly molding and power supplies. Telecom and networking products is a JV with Bharti for Airtel. The telecom piece is also looking very promising, because Airtel will also keep on shifting more from imports to domestic manufacturing. We have started commercial production for them in ODM category. We have also bagged a large order from Airtel for HD Zapper set-top boxes, and the mass production should start from Q2 of next fiscal. The PLI scheme has also been extended by one year along with addition of hybrid set-top box and other telecom products added to the same. We have taken up a new facility for this particular business, and this facility should be operational by December of the current fiscal. We are in active discussions with some large global brands for existing and new product categories in this particular business. We are also building an R&D, and we've recruited a senior resource as R&D head for telecom devices. Laptops, tablets, and IT hardware products. In addition to manufacturing laptops for Acer, we are also in the process of starting manufacturing of tablets for Lenovo, whose volume is going to be almost 300k per year. We are expecting that the government is gonna roll out a revised, more attractive PLI scheme for IT hardware products with higher incentive outlay. We are awaiting the same. Inverter control board for air conditioners. A 40-60 JV with Rexxam to manufacture inverter controller board for air conditioner is now operational in manufacturing facility in Noida. The revenue potential in this is quite immense, with the strong EBITDA margins both for domestic and export market. We are committing to make an investment of INR 51 crores over five years in this, and this Dixon share is going to be 20-odd crores. Wearables and hearables. On the wearables side, the Indian market is the third largest market globally and is one of the fastest growing. In this, we have a partnership and JV with boAt, and we have already achieved a milestone of manufacturing 1 million devices per month. That's the number we touched in the last lot of TWS, and very shortly, we'll also start manufacturing neckbands and smart watches. A new facility in Noida is being set up for that. We are hopeful and confident of in fact, setting up this facility and making it operational by December this current year. In line with our strategy in this particular category also, we'll be setting up the SMT lines and at some point of time looking at backward integration in the polymer processing space. In addition, we are about to start manufacturing of TWS and the smart watches for Samsung also in a dedicated plant in Sector 90 of Noida. Refrigerators, we have started the construction on 20 acres of land in Greater Noida, where we are creating a capacity of 1.2 million DC under the categories of 190 L to 235 L with multiple features. We are in final stages of closing an agreement with large brand with commitments of almost 0.6 million, which is 50% of our capacity. The trials of this particular product line are expected to take place by Q2 of 2023-2024. Thanks very much, and now, me and Saurabh look forward to responding to your questions please. Thank you. Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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. Thank you. We take the first question from the line of Mr. Aditya Bhartia from Investec. Please go ahead. Hi. Good evening, sir. My first question is on the lighting business, wherein we have seen some challenges in the last couple of quarters. Just want to know how are you seeing things over there? Should we be anticipating an improvement in that business? What exactly have been the issues and some of the steps that you have taken to tackle that? Aditya, if you recall, in our last interaction, I had shared that there were certain internal challenges. Mm-hmm. We had in execution. We have now new management team taking over. Business is coming back to normal, being reflected in the numbers. The margins have improved to come back to almost original level of 8%-10%+. The sales is improving. We have added new customers. The customer product portfolio is being expanded. New resources for exports have been acquired and have been deployed. We have significantly improved the financials of this business. As I shared with you in my opening remarks, we have been able to reduce the working capital intensity by almost INR 85 crore. Exports to certain markets have taken off. I think it's gonna take a quarter or more to come exactly back to normal and to a growth path, but it's definitely come back to. It's on the correct path. That's what I can share with conviction. Understood, sir. You referred to some exports to the Middle East region. If you could just elaborate how large is the opportunity and are we seeing that ramping up over the next few quarters? This is the first export order being executed of multiple home solution lighting products. The shipments are gonna be made in the current month. I'm very sure that we're gonna have repeat orders on this business. We are also pursuing, as I shared with you, some large RFQs of our anchor customers for ceiling lights in the U.S. market. We feel confident that we can meet their target prices. I think export business will definitely be the high point of lighting as a vertical, but it's gonna take some time. It'll take couple of quarters or so to ramp up. Understood, sir. My second question is on the TV business. With this movement towards JDM and ODM contracts, does the Google license make it even more lucrative and easier for us to follow a JDM opportunity? That's my first question. Second question, a related question that you mentioned that you're looking to move some of the other customers to JDM contracts as well. Are these existing customers who would get kind of upgraded towards JDM contracts, or are we looking at new opportunities altogether as well? Responding to the first part of your question, almost 65% of television market is on Android platform. That I think that's the question, right? You had the first one. No, I wanted to understand, sir, that with us having this Android license, does it become easier to follow the JDM opportunity to offer an ODM kind of a solution on the TV side? What I wanted to share was, one, what is the opportunity like? Almost 65% of the Indian TV market is on Android Google. Some of the large existing brands who are also existing customers are on Android Google platform. They have already started engaging with us for migrating from prescriptive mode to a JDM/ODM mode. That is one big plus. Further, there were many brands, tier two and tier three brands, which were on USP, which would like to migrate to Google Android platforms because the performance of the sets and also the cost competitiveness with an Indian partner like Dixon enhances. There is a large opportunity undoubtedly, and we have already signed up with some brands like Acer for that. The existing brands with whom we are in discussion for migrating from prescriptive to JDM/ODM. Sorry, I'm not able to share the names, but please be rest assured the dialogue is on and the response is positive. Great, sir. That, that's really encouraging to hear. Thank you so much, and wish you more success. Thank you, Aditya. Thank you very much. We take the next question from the line of Sonali Salgaonkar from Jefferies India. Please go ahead. Good evening, Mr. Lall. Good evening, Saurabh, and congratulations on a great set of numbers. My first question. Thank you, Sonali. My first question is regarding the guidance for revenue and margins in FY 2023. Now, from last quarter to this quarter, you know, we have added a lot of customers, lot of initiatives, including the Google TV, Android. You know, would you like to probably give us the guidance again, or do we maintain that? Sonali, I think just hold it for some time. To be very candid, we are in the process of concluding certain large contracts. You know very well that large piece of our business is the mobile opportunity, which is in the process of concluding. Just wait for some time for Saurabh and me to come back on these numbers. It's at the final stage. Sonali, we'll have better visibility in another month or so. Couple of months. Yeah, month, yeah. We'll be able to better guide the market. As of now, you should stick to our numbers which we had guided for. Sorry, Saurabh. Could you just, for the benefit of all, repeat the numbers of guidance as of last quarter? Yes. We stick to a guidance of around INR 15,000-odd crore and we maintain that guidance. Understood. The margin at about 4%. 3.8%-4%. Yeah, 3.8%-4%, yeah. Okay. Got it. Secondly, how is the demand scenario shaping up? I mean, we concluded the initial Navratri, then we are just about to begin the Diwali. What are your initial feelings of the festive demand or the demand for this quarter? Sonali, we find that in certain categories, the demand has been very good. We find that in televisions, the inventories off the shelves of the retail outlets also, both online and offline. We find the demand of washing machine, particularly with some large brands who are our anchor customers, to be very, very good. We find the demand for hearables and wearables to be extremely good. However, I don't find the demand in certain other categories to be as strong as these particular product categories that I'm talking about. I feel that Diwali should be good for certain products, in fact very good for certain products and average for some other products. We need to wait and watch for Diwali to get over, because undoubtedly the month of November is gonna be muted. I see the forecast that are coming to us for the month of December, we start going back to normal, and the next quarter looks definitely much, much better and good. It's that kind of response I would like to share with you. Got it, sir. Very clear. Thirdly, on the price hikes, have we taken all the price hikes required to fully pass on the raw material cost calculation that we saw up till a quarter back? Of course, the commodities have started softening from now, but, you know, are we in a position to take further price hikes if required? If you see in our main ODM businesses that are washing machine and lighting, and also the new business in which we are step-by-step marketing to ODM/JDM, that's of TV, the margin profile has improved. We have touched 9% in washing machines, which is almost back to normal. In lighting also, we have touched 8% odd. You'll see that there is a 50 basis points expansion also in the LED television as a category, which is primarily because of ODM business. Margins have almost normalized. That's what I would say. Got it, sir. Very clear. Thank you. That's it from my side. I'm wishing both of you a happy Diwali in advance. Thank you, Sonali. Thank you, Sonali. Thank you. Thank you very much. We take the next question from the line of Mr. Dhruv Jain from Ambit Capital. Please go ahead, sir. Hi, sir. Thanks for the opportunity and congratulations on a good set of numbers. Hi. Question on this, the OEM opportunity in television. How should we look at the margins here? There has been a significant jump in OEM share, you know. Can you look at the margins we were having in home appliances or, you know, what's going to be the margin profile here? Dhruv, margins in ODM/OEM business in televisions is going to move up in steps. I feel that when we migrate in phase one, the margin expansion is going to be somewhere in the range of around 50-70 basis points. As I shared with you in my opening remarks, that we are setting up the backward integration footprint of injection molding and possibly laser metal processing, which will be operational in couple of quarters. Once we are able to shift the toolings into India, then the margin should expand by another 50-70 basis points. In two phases, I think the margins can expand by 125-150 basis points. Thanks. And sir, I had a question on the home appliances piece. You know, we've seen a fairly good growth on a YOY as well as on a quarterly basis. And we've had some decent contribution from the FATL piece. If you could just quantify what's been the contribution of the FATL and, you know, how do you see this panning out, say, in FY 2023, the mix between FATL and semi-automatics in 2024 if you have it. In the current fiscal, growth, we're targeting somewhere between 1.7-1.8 million washing machines. Out of that, 1.5-1.6 is going to be in the semi-automatic category. 200K is going to be the category of FATL. If you recall, in the last fiscal we had done 1.1 million. From 1.1 to 1.7-1.8, that's a significant growth. In the next year, I feel the major growth is going to come from FATL. I'm aspiring that this 200K number should reach around 450K-500K, because now we have a complete product portfolio and the customer acquisition is being worked upon. In the semi-automatic category, that's a category which is kind of normalizing. We are working on some new customer acquisition, but let's see. In that category, I feel the growth is gonna be muted. From 1.5, 1.6, it's gonna be somewhere around 8%-10%. Total what we can aspire from 1.7, 1.8 to reach around 2.2. Thanks. Sir, you know, just a bookkeeping one. If you can just give us the volumes of growth categories. Thanks. In this quarter. Yeah. Dhruv, LED TVs, the volume was INR 11.6 lakhs. That's a growth of 54% from Q2 of last financial year. As against INR 7.5 lakhs last year, there's a growth of 54%. But clearly, the revenues have not grown, mainly because the selling prices of the portfolio have come down from INR 18,00- INR 11,500. And the significant portion of that is on account of the display or the open cell, which is corrected in the open market, in the international market. Otherwise, in volume numbers, we have grown by 54%. Our bulb numbers are around 42 million, 43 million. Batten was around, again, 4 million. Downlighters was 1.4 million. And then we had some small other categories. Semi-automatic washing machine, we sold around INR 4.6 lakh. Fully automatic washing machine, we are now clocking a run rate of almost INR 22-INR 23 thousand, so it was around INR 64-INR 65 thousand in this quarter. Smartphones outside Samsung was around 10 lakh. Feature phones outside Samsung was INR 13 lakh. Smartphones for Samsung was around INR 26 lakh. Feature phone for Samsung was around INR 33 lakh. CCTV was around INR 14 lakh. DVR was INR 3 lakh. This is broadly the quantities that we sold. For both the wearables and hearables, we did around 2.3 million. In both we've almost ramped up our production to almost 1 million devices a month. In the case of telecom devices, that's the ONTs and modems for Airtel, we have touched a production level of 100K a month. That's great, sir. Thank you so much. That's all from my time. Thank you very much, sir. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touchtone phone. We take the next question from the line of Mr. Sujit Jain from ASK Investment Managers. Please go ahead, sir. Yeah, thank you for the opportunity and, you know, our compliments on a good set of numbers. Sir, when you speak about this export opportunity, first of all, congratulations. After a lot of hard work that has opened up for us. But the categories that you speak about, home solutions, kits, rope lighting, ceiling lights, et cetera, these look like smaller in terms of opportunity. One just wanted to see that and check on a medium-term basis, how large this opportunity could be. Sujit, please appreciate that Dixon's main focus till now has been on bulbs as a category. We got into battens. Both bulbs and battens in India are reaching some kind of flattening sales. Because particularly in bulbs, the government's program under EESL, a lot of coverage on the ground has been done. The market undoubtedly is shifting more and more towards ceiling lights. That is downlighters. There is a lot of potential on the strip lights perspective. Both, I mean, on the downlighter side, ceiling light side, we are expanding our capacity to 30 million. This 30 million should give us an additional revenue of almost INR 300 crores. The strip lighting, wherein we are making investment of almost INR 6 crore for setting up a new line, should give us a revenue of almost 50-odd crore. This additional revenue of INR 350 crore from these two categories should come in a couple of years. This you are talking about, domestic opportunity, INR 350 crores? I'm not looking at export at all. Because exports, I'm not able to put the number in the budget. If we are able to crack export, then each RFQ is around INR 200 crore. That will be mainly traditional products or these two new lines, is what I'm trying to get at. Ceiling lights. lights. You see, please appreciate in ceiling lights, in U.S. market, there is a tariff differential. When you import from China, the duty is 25%. When we import from India, the duty now is 5%, so there's a 20% arbitrage. Right. In terms of the margins in lighting division, is the issues in terms of high cost inventory, et cetera, is finally completely behind and, so therefore now we see sustainable margins, in lighting division? Sujit, as I shared in my response to Aditya's question, we humbly accept that there were certain execution issues at our end, and those have been addressed and those have been corrected. We have got a solid management team now running this business. We feel that there can be some temporary shocks here and there because there are so many moving parts in business. To a very large extent, this business is on a stable note now. Yeah. Sujit, we feel confident this margins going forward should be sustainable. Right. When I see we used to. We've done a margin of, you know, in lighting products, at times a little higher than this on a full year basis also, including in, let's say, FY 2021, 8.8% margin. Do we get back to those kinds of margins? Getting into specific numbers might be a slight challenge, but we've already touched 8%. Yeah, the teams are working on a lot of value engineering, consolidating the industrial footprint, automation, productivity improvement, backward integration. Give us some more time. I'm very sure that the margins are gonna climb up. Once we start accruing the PLI benefits for which the investment of INR 20 crores is being made in the current fiscal, once that factory becomes operational, the margin expansion will take place. Right. In TV, this Google Android license opening up opportunity has opened up an opportunity for us in terms of ODM solutions. You know, our main client, he has his own OS. Therefore, to that extent, rest of the business has this opportunity. Is it a correct understanding? Yeah, you are correct. Yeah, Sujit, that's the right understanding. Sure, sure. Thank you. All the best. Sujit, I mentioned 60%-65% is the addressable market for us. Which also, if you look at in terms of volumes, we're talking about a 14 million market, and 60%-65% would be 9 million, 8.5 million. That becomes an addressable market for us. That'll be a combination of some of your existing brands and also some of the potential customers which are not with us today. Sure. Thank you. Thank you very much. We take the next question from the line of Mr. Sandip Sabharwal from ASK Investment Managers. Please go ahead, sir. I have two questions. The first question will be essentially, how does the pricing work with your large OEMs? Because the raw material prices are so volatile, so is it a quarterly reset? It's an annual pricing? How does that vary? In almost 80% of the business, which is the prescriptive part of the business, there the understanding is that Dixon will not take any currency or commodity risk, so that's immediately passed on. We were not impacted with any kind of a commodity or the input price increases. It's only in the 20% of the business, which is predominantly the lighting, washing machine business, and now some portion of the TV business, where the commodity or the currency risk are passed on with a lag. It's different understanding with different customers. With some customers it is one month, with some customers it is three months. That's broadly the way we work with those customers. For this quarter, what would be the kind of PLI benefit you received or accounted for? Yeah. The first six months of this financial year, we have booked an income of almost INR four and a half crores on account of the mobile PLI. Because, as you know, we are the first company under the mobile PLI which has already received the first check from the government pertaining to last year. The whole system is very much stabilized. Clearly, we see that the way it will work going forward is that whatever, in whichever period you are able to achieve those revenue and CapEx thresholds, you apply. Within couple of months, we'll now get the PLI from the government. That system is absolutely stable. We feel confident and this, so we have accounted for around INR four and a half crores in the first six months of this financial year. That's what you have accounted for. You account for when you receive or you keep on accounting for that? The way it works is we have accounted for our share of income and the way in, as far as the balance sheet is concerned, there will be a receivable from the government. Only that receivable gets knocked off when the cash comes into the system. On the liability side, there'll be payable. Whatever our understanding with the various customers is, there will be a payable on the liability side. As and when the cash keeps coming in, both receivable and payable gets adjusted with that cash amount. In the first six months, only INR 4.5 crore has been accounted for, right? That's That's what you're saying. Across segments, categories. Last year we had booked an income of INR 9 crore, out of which some portion has already come in as cash to us. This year we have booked INR four and a half crore in the first six months. Okay. Thank you. Thank you, sir. We take the next question from the line of Mr. Omkar from Sri Investments. Please go ahead, sir. Mr. Omkar, your line is unmuted, sir. Please go ahead with your question. Yeah, my question was regarding the recent launch of 5G. How would it exactly benefit Dixon as you would be the first one to manufacture? You're talking about the 5G rollout? Yes, yes. 5G rollout, there are two potential opportunities for Dixon. One of course is on the mobile devices. Dixon is one of the first few companies which has started manufacturing 5G, and our infrastructure is all geared up. This is both for the domestic market and export market. That is one. Second, on the telecom devices front, we are already registered under the telecom PLI scheme for the networking products, both for 4G and 5G. It is at a very basic level, but we are definitely exploring the EMS opportunities and dialogue with certain potential partners has started for doing these 4G, 5G networking products in our new factory. But it's at a very basic level. But undoubtedly, we have started dialogues with the potential partners. How big this opportunity can be as per the management in upcoming years? The factory qualification in this is gonna be a complex process. To put a number to this potential, I think it's too early at present. We recognize this opportunity. It's a large potential opportunity and the teams under our new CEO for this business, Sukhwinder, who was earlier with Tejas, the work has already started. There might be a better clarity in the next six months? I feel that possibly something in this area we should be able to conclude initial stages, but should be able to conclude by Q4 of the current fiscal, that is March quarter. Right. Okay. All right. In terms of the free cash generation, you have done pretty well this quarter. Because of that, ROE and ROC has expanded well. How do you see the trend for this ROE and ROC for the full year as well and for the rest of the year as well as for the next upcoming two years? We feel, yeah, if you remember last year, it was a bad year for us as far as the working capital was concerned because clearly you had the shortage of components, supply chain issues last year on account of COVID, and we ended up deploying money in the working capital. Now clearly, those headwinds are behind us and we are putting internally a lot of effort to reduce our working capital intensity in lighting. As you see the numbers, INR 85 crore of working capital has come down, and that is significantly on account of the inventory reduction, which has happened. Clearly we need to do a lot of work, some of the work on the working capital intensity that has been deployed in mobiles, which we are working on, and we feel confident that that should also come down. My sense is the ROC should only be on an upward trajectory side. You should see better numbers as far as March 31st financials are concerned because clearly we have that earnings visibility with us and clearly we see that working capital intensity should come down because there's huge amount of focus internally on managing that. As you see that if more customer additions and significant part of the growth area is in mobiles, which is predominantly will be a prescriptive business and the working capital intensity as per the nature of the business would be small. If that business contributes 40%-45% of the revenues, and even the other verticals like telecom and with the revised IT hardware scheme, all these businesses are businesses with a low capital intensity, high asset turns. We see that the ROC profile of the company should keep going up. Very difficult to give you a number, but, yeah, it's what we are aspiring for in the next couple of years. If we continue on our plans and achieve our plans, I think so it should be a 40%+ ROC business for us. Of 40%? Okay. The overall business as Dixon as a company, we are saying. Dixon as a company, right? ROC of around 40%. 40%, yeah. As far as the cash and cash equivalent is concerned, you have around INR 200 crore, I guess. What would be the CapEx for this year or any planned CapEx for the next year? The first six months we have done a CapEx of around INR 185 odd crores. What we have budgeted for this year is somewhere around INR 320 crores-INR 330 odd crores. Broadly, we will land at that number only. One needs to finalize the plans for next year, but my sense is broadly it should be in the similar lines for next year as well. Okay. All right. Thanks a lot. Thank you, sir. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touchtone telephone. We take the next question from the line of Mr. Gopal from SBI Life Insurance. Please go ahead, sir. For the opportunity. The question is, in the last quarter, our revenue guidance were at INR 17,000 crore, and we were pretty confident on 4% margins. Are we revising our guidance down to 15,000 and even revising the margins down? Whereas if you have seen a decline in the commodity prices, ideally it should have helped in terms of improving margins. Can you just help us, which are the segment would have kind of disappointed in terms of scale-up? Yeah. Gopal, we had, of course, corrected the guidance last quarter only. Yes, you are absolutely right. When When we started this financial year, somewhere around April and all, we were at INR 17,000 crore. Within a couple of months we had brought it down to INR 15,000 crore. Really today also, you are absolutely right that, of course, commodity prices have come down. You have seen that is reflected in better margins for our lighting and washing machine business. At the same time, the currency has also depreciated. Indian rupee has also depreciated, which has again had some kind of an impact on our ODM business, where I mentioned that currency also gets passed on with a lag. Now, what has changed in our numbers? Clearly we see that the mobile market was slow and the numbers that we'll end up doing for our anchor customer there for the domestic market. It's not only true for our anchor customer. Overall, the mobile market was slow, especially in the first quarter. Clearly one of the reasons for bringing down the guidance was low sales of our anchor customer mobiles. Also we realized that the prices of open cell, which is also very dynamic globally, they had corrected significantly. One is not an expert when one started, the price corrected further during the year. The revenue, the volume growth in TV has been very good. Clearly we have a plan for ODM. We have a plan for backward integration. Clearly the price of open cell has corrected, which will lead to lower revenues or may not lead to a revenue growth despite a volume growth this year. These are two fundamental reasons. Third, I would say some of the businesses that we thought would start up in the first or second quarter has taken slightly more time for us to ramp up and stabilize some of the new businesses. I think it's a combination of everything put together, I think so we reduced our guidance to INR 15,000 crore. That number is also dynamic. As mentioned by Mr. Lall, if we get two customers in place in the production for mobile start in Q4, the numbers can be potentially slightly higher. Yeah, we don't want to commit on those numbers. Second, the margin. Yeah, margin, I think so we still feel that it should be somewhere in the range of 3.8%-4%. On a conservative basis side, I think so we are keeping a margin of 3.7, 3.8% because there are a lot of moving parts right now in the business. Also as Saurabh just explained, let me illustrate the TV business. In the last quarter, the volume has grown from INR 7.3 lakhs to almost INR 11.5 lakhs. That's 54% growth. The value growth has only been 3%. There are certain moving parts in business which are beyond our control. That's the reason in any case, as Saurabh is sharing, we had corrected our guidance to this number of INR 15,000 crore in the first quarter itself, in the opening of the second quarter. The margin is dollar appreciation. Margin impact is because the product mix combination of various factors. Okay. Sure, sir. Earlier in the call also, we said we'll give more color in the coming months about revenue guidance and all. Is there like upside on the revenue or there can be further downside to INR 15,000 crore? Just wait for two-three weeks. We are in the process of concluding certain contracts. Okay. We are very optimistic of concluding, but there can always be a slip between the cup and the lip. Just wait for some time. Sure, sir. The second question is in the margins for home appliances business. We used to make 11.5%-12% margins. Obviously it has been improving for last couple of quarter. You know, by when should one expect a double-digit margin for this segment? Because even earlier we were giving some indication of margin improvement because of FATL coming and mix improving. If you can just give your- Clearly, ramp up the commercial production has already started. Okay. As we shared in our remarks that we've already reached 20-23K per month kind of level. Right. Still the capacity is being utilized only at 40%-45%. It's gonna take some time to reach a capacity utilization of 70%-80%, which might take three-four quarters more because new customer acquisition is a long drawn process. There are technical approvals, technical audits, some new toolings. I think further expansion, some minor expansion in operating margin in washing machine might take place in a quarter or two. To go back to a double-digit number would take three-four quarters. Sir, how should one look at mobile division margins? Should it be in the similar range of 2.7%-3% or there is a scope for further improvement? No, as of now, they would have been similar range. Sure, sir. Thanks a lot. Thank you, sir. We take the next question from the line of Mr. Bharat Shah from ASK Investment Managers Limited. Please go ahead, sir. Yeah, hi. Two questions. One, given the way there has been a lot of moving parts and operating challenges in the environment, and given the kind of business that we manage with long supply chains and differing products, multiple centers at which we need to do our manufacturing, our results earlier so far have not probably fully reflected our potential, and I suppose you two would agree with that. Can we say now, finally, in terms of the size of opportunity, the way our operating teams have been set up, the benefit of PLI, the contracts that we have with the clients, and despite world still remaining a very difficult and, volatile world that we know, overall, can we say this quarter is kind of a departure into the kind of direction that we want it to be and, the strength at which, it is supposed to perform? In other words, would you say that, we are kind of out of, the kind of a little slump that we were stuck in for a variety of reasons, some internal, many external, but probably despite some of those factors remaining, is the current quarter the period of now departure into a far more, robust looking picture? Bharat Shah, undoubtedly, last few quarters, you very correctly stated that largely due to the external factors, somewhat due to the internal factors, were challenging. However, I think, internally the team has done well, executing some large projects, expanding our capacities, expanding our design capabilities, rolling out new factories, becoming an ODM player in televisions, getting into the verticals of telecom devices and doing it well, getting into the vertical of wearables and ramping up well, new talent acquisition, migrating to JDM, ODM in the business of, televisions. I think these are very significant positives. Correcting the stress that we have had in the washing machine margins. Good rollout of FATL as a vertical. Similarly, lighting, in which we had, lot of challenges is on a correction path. I think those have been very significant positives. Now, have we covered the complete ground? I would say that we have covered 70-75% ground. There are certain large opportunities for which one has to close some more large contracts, particularly in the space of mobile, which one is fairly confident of cracking. Once we have that, then undoubtedly we are at next level of stability, which I am confident that we'll be able to fructify. On a medium to long-term basis, undoubtedly, the opportunity is humongous, the kind of opportunities that are there in front of us. Also we feel that we have the bandwidth and we are at an inflection point for that kind of thing. That I'm very candidly sharing my viewpoint and thoughts on this. Sure. Appreciate, Atul. The second question, Saurabh mentioned, that in couple of years' time, we should be touching return on capital employed of 40%, if not higher. Structurally, over the years, in many interactions, I've consistently heard, that 40% or higher is something which is within the character and the structure of the business and the way we run the business model. Of course, due to very difficult volatile period of last couple of years, things have been different, we understand that. These attainment of 40% now in couple of years is a reasonable degree of certainty or it is still subject to kind of imponderables. Bharat Shah, you see, lot of CapEx has been front-ended. For example, mobile, FATL plant, refrigerator, telecom devices, backward integration piece of lighting. Lot of CapEx has already been made. In the current fiscal also, almost INR 330-340 crore of CapEx is gonna be made, out of which INR 185 crore has been made. In spite of this CapEx, particularly in the current fiscal, the borrowing both at gross and net level has come down. ROC has improved by almost 250 basis points. We feel that now we have to spread those assets. As Saurabh Gupta shared in his response, that these are all high asset turn businesses. By nature and the DNA of what Dixon is all about, we are extremely focused on our working capital intensity, on our operating cycle and current assets. One feels confident that in the existing canvas of business, our aim of touching a 40% ROIC is very much achievable, possible, and we are committed to it. However, I'm not talking about the moving parts or challenges that any business environment can have. That is something separate. This particular industry of ours, electronics manufacturing, is on a high growth path. If a large opportunity comes and it requires another round of CapEx, then we'll not shy away from it. Then again, the ROIC can be impacted for triggering the next round of growth. However, with the same canvas in which we are playing the game at present, we are fairly confident. Sure. Basically, our size and scale will improve, and therefore, operating leverage will kick in. That in turn should improve our margins, plus the kind of mix of the business, whether own design or pure manufacturing also further should improve our margins. Therefore, will the principal source of improvement in return on capital employed will be the margins led by operating leverage, or in addition, margins which will generally improve due to the less hostile raw material and other situation, plus improvement in the working capital efficiency. Will all the levers are expected to work in this assumption? Or what is the principal assumption we are making as a source of improvement in return on capital employed? Sir, it'll be a combination of everything. You have absolutely put it right. On the numerator side or the earnings side, yes, it'll be a combination of operating leverage kicking in. Also absolute ODM revenues going up, so the margin increase happening on account of the ODM migration to our own design solution, because there is strategy to migrate more and more to our own design solutions in every category. Third, we are committed to do more and more backward integration in each of the verticals, so that should lead to margin expansion. On the denominator side, yes, the verticals that we have added. Just to give you an example, mobile, we have already done a CapEx of INR 200 crores. A lot of CapEx has been front-loaded, and there is a significant focus on managing the working capital. On the denominator side, it'll be a combination of better working capital management, and also, since a significant portion of CapEx has already been done on the opportunities that exist today. Sure. Thank you, Atulji. Thank you, Saurabh. Thank you, Sir. Thank you, Bharat Shah. Thank you, sir. Thank you very much, sir. We take the next question from the line of Amit Ghawade from Metaverse Equity Fund. Please go ahead, sir. Yeah. Good afternoon. Thanks for the opportunity. Sir, my question is, what demand trajectory in different verticals you are expecting in next financial year? Do you feel it will be hampered due to global uncertainty? What we feel is there is definitely a positive outlook in the vertical of electronics because of the rural opportunity. I have already shared in response to an earlier question on home appliances, that it's going to be a normal growth of around 10%-20%, and which is gonna come mainly from the FATL as a category. In mobiles, we are working on new customer acquisition, which I've just shared that we are fairly confident of concluding soon. That'll be a significant trigger. Existing businesses of CCTV is again going to see normal growth. We are expanding our capacity there. Lighting, let's just wait and watch, because at present, largely our business is in the domestic side, which is having a normal growth. In that, we are adding new product portfolios in ceiling lights, in street strip lighting. Which is going to give us growth in that business. New verticals undoubtedly are gonna be a high growth area for us because the base is small, namely the wearables, telecom devices, and we feel that by Q3 of next financial year, we are also going to have the commercial production started for a ref-related volume. It's difficult to put in number form, but this is the contours of growth one foresees. Okay, sir. Thank you and best of luck for the future endeavors and Happy Diwali. Happy Diwali. Thank you, sir. We take the next follow-up question from the line of Mr. Gopal from SBI Life Insurance. Please go ahead, sir. Hi, sir. Thanks again. If you can just give some color on, you know, this Xiaomi-related issues on the FEMA side and all. Does it have any impact on Dixon's television business? Second is on the competition side, we have seen a lot of companies investing into television manufacturing in India. Does that have any risk to our customers? On Xiaomi side, they are a large customer, and 95%-98% of the requirement is done by Dixon. With the developments happening on their regulatory front, undoubtedly we were also concerned. Yeah. I personally had a deep dialogue with the India leadership team and also Beijing leadership team. They've repeatedly assured me that there is no impact on their India business. The budget forecasting and the business that we have done till now, there has been no impact. There has been no impact on their payment or lifting of stocks. In fact, they're revising upwards their forecast for coming quarters. Mm-hmm. That's the insight I have. However, it's a large disruptive development for any conglomerate. Mm-hmm. I don't have an insight, but, this is the status of our current business. Responding to your next question of competitive intensity. Yeah, undoubtedly, the competitive intensity is increasing and Dixon has to and is gearing up for meeting that competition. One is the capacity which generates an operating leverage for us. Second is the deepening of manufacturing and backward integration. We will be, and we already are, the most backward integrated plant. Third is owning the design. In this year itself, almost 25%-30% of our manufacturing in television is gonna be Dixon design solutions. This enhances the stickiness with our customers. Fourth is owning the Google Android license. This gives us a much larger leverage because no other ODM player in India has that license. Next is that, as on date, we are much ahead of our competition. We are at least 2.5x-3 x the number two player, and I think almost 6 x the number three player. We have that advantage. But, yeah, of course, we are in a good position, but the hubris should not set in. We have to keep on working to keep on satisfying and adding value to our customers so that we enhance the stickiness. That's it. Sure, sir. Thanks a lot. Thank you. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for closing comments. Thank you very much for participating in this call and wish you all a very, very happy Diwali. Thanks once again. Thank you very much. Happy Diwali to everyone. Thank you. Thank you. On behalf of Emkay Global Financial Services, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.