After a delay exceeding eighteen months, the government has approved a joint venture (JV) between Dixon Technologies and Vivo Mobile India. Dixon, a leading player in the country's Electronics Manufacturing Services (EMS) sector, holds a 51% stake in the JV, while Vivo owns the remaining 49%.
Reasons for Delay and Growth Potential
The significant delay in approving the JV was due to thorough regulatory scrutiny under Annexure 3, which requires examination of investments from countries such as China that share a land border with India. The approval of this JV opens opportunities for a rapid increase in production volumes, as well as supporting profit and margin growth through backward integration and export capabilities.
Volume and Revenue Forecasts
A key advantage of the JV is the substantial increase in volumes. Vivo, which holds a 23% market share in India, concluded the 2025 fiscal year with a volume of 35 million units. The company forecasts that the JV will account for about two-thirds of the total volume, which should add 22 million units annually. Since approximately 40 days are required to commence production after approval, full revenue and volume growth from the JV is expected in the fourth quarter of December.
Management estimates suggest the JV could lead to a revenue increase of ₹30,000 crore, with selling prices being higher than those of the existing mobile device portfolio. JP Morgan Research anticipates that the JV will add 11 million mobile devices in the 2027 fiscal year, and 22 million units each in the 2028 and 2029 fiscal years. This JV supports an increase in revenue forecasts by 24–39% during the 2027–2029 fiscal years, although the expected earnings per share growth is lower—at 13–18%—due to the 51:49 JV structure and minority shareholder stake.
Business Expansion and Export Opportunities
The JV could significantly boost Dixon's mobile phone sales from 32 million to approximately 55 million units, creating a stable revenue stream for the mobile segment. Beyond Vivo, the major EMS player has other prospects, particularly in the export market. Manish Choraghe of Keynote Capitals notes that Dixon is exploring export opportunities through its subsidiary Ismartu in Africa and a partnership with Longcheer, while a steady impetus from a major client in the US further strengthens the export revenue profile. He concludes that Dixon's business in mobile communications remains robust due to customer loyalty and the scale of volumes, which are its two most sustainable competitive advantages.
Backward Integration and De-cyclization
In addition to increasing volumes, the company's efforts toward backward integration and entry into specialized EMS verticals should also reduce cyclicality and improve margins. Motilal Oswal Research indicates that the company is already making capital expenditures on backward integration of displays and camera modules. Teena Virmani and Prerit Jain from this brokerage firm believe that the benefits of backward integration will start to materialize from the second half of the 2027 fiscal year.
They project that by the 2028 fiscal year, backward integration initiatives will offset the margin reduction caused by the conclusion of the PLI 1.0 program this year. Nevertheless, for the June quarter, the brokerage firm expects the operating margin to decline by 50 basis points year-on-year to 3.3% due to the cessation of PLI incentives for mobile devices, although improved revenue mix across segments should limit this decline.
Growth Catalysts and Valuation
Among the main drivers for stock growth are the continued support for domestic electronics manufacturing policies, including the PLI 2.0 scheme for mobile devices. The company should also benefit from diversifying its revenue sources as it expands into other EMS verticals, such as aerospace, automotive, defense, medical, and industrial electronics. This will help reduce dependence on the consumer sector and enhance profitability.
Emkay Research believes that Dixon's strong return ratios, negative working capital cycle, and reliable cash generation justify its premium valuation. The brokerage firm assigns a 'buy' rating with a target price of ₹15,200.