What's Running Growth At Dixon Tech And Ceat? | NDTV Profit
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00:00Welcome, this is NDTV Prophet, well on the sidelines of MK's investor conference, my
00:18colleague Charu were caught up with the management of Dixon Technologies, Atul Lal and Kumar
00:25Subbiah of SEIT about the outlook of the manufacturing space, listen in.
00:30Mobile Charu is our largest trigger of growth and that's the largest piece in the electronics
00:38manufacturing sector and we have gone on a very aggressive customer acquisition.
00:46Today in the Android ecosystem we have all the brands as our customers and a couple of
00:54more global brands are going to be added in the next quarter or so.
00:59So out of the outsourcing opportunity of 90 odd million, now we have created a capacity
01:03of 50 million which is a very large piece and also a requisition of iSmartU has been
01:12concluded which is going to add significantly to a capacity in our revenues.
01:18So mobile is going to be a largest piece and please be rest assured that last year we did
01:235 odd million, this year we should close at 28 to 30 million.
01:26So that's the kind of growth we are expecting in the current fiscal in mobiles.
01:32That's very confident sir, that's really great.
01:35So consumer and lighting has been weak for the industry as well and what's the outlook
01:41for financial year 2025?
01:43You see both televisions and lighting industry as such, the growth has been very muted and
01:52we are already in televisions having a very large share of the pie.
01:57So the growth is going to be rather flat or almost not there in the television segment.
02:04In lighting it has been a bit of a struggle for us as a company because the industry went
02:10through a huge unit value correction.
02:13But now I see lately the prices are stabilizing, we are getting back on track, we are adding
02:20to our product portfolio, we are in the process of launching our professional lightings.
02:25So the business is coming back on track.
02:28But is it going to be a very high growth domain for us?
02:31I don't think so.
02:32But is it going to be coming back on profitability and growth path?
02:37Yes.
02:38For lighting that is?
02:39That's right.
02:40But for television as you said?
02:41Television is going to be muted.
02:44As a IT hardware has been the next growth segment, what's the growth strategy there?
02:51So we are a part of IT PLI 2 of the Government of India.
02:57We have already acquired top four global brands as our customers.
03:03We are setting up a new campus in Chennai, which is going to be operational by Q4 of
03:10the current fiscal.
03:11The work is already on.
03:13So we are extremely bullish and committed to this particular sector, because the addressable
03:21market is almost 10 billion dollars.
03:25And we would like to, let's see how it pans out, but we'd like to replicate what the company
03:31has been able to successfully achieve in mobiles, also in IT products.
03:35To start with, we are already manufacturing notebooks for brands like Acer, and for all
03:42the other brands, we are targeting for some brands in Q2 of this, Q3 of this fiscal, and
03:48for the other brands by Q4 of this fiscal.
03:50So it's going to be a large opportunity for us.
03:54Year has started off well.
03:55If an organization grows, okay, it has an above effect on you.
03:59So generally positive.
04:00Look forward to even a better year.
04:02Last year was a good year for us, and we look forward to even something better than last
04:07year.
04:08That's good, sir.
04:09Going on to the questions, how do you see the raw material price impact in Q2?
04:15We had outlined in terms of raw material prices, we expect it to be higher than Q1 by about
04:235-6%.
04:24When Q1 also, the raw material prices had moved up by about 4% over the previous quarter.
04:32And we stand by that, and natural rubber prices, as we had earlier shared, it's at last 12-13
04:38year high, particularly the local prices.
04:41We expect that to correct over a period of time as the arrivals from international market
04:47into India has started improving from beginning of August.
04:52So we would like, we hope it will have a positive impact on the local prices soon.
04:59Is there a time limit on that?
05:01Are you seeing that it is going to improve by this month or by this time?
05:06Today, the local prices are at almost Rs.50 per kg premium to the international prices.
05:14International prices are also inflated because of steep increase in freight to the extent
05:20of what, at least $150 per tonne.
05:24There were issues with respect to lead times in terms of movement of natural rubber from
05:29Southeast Asia to India, not only for natural rubber, for others.
05:32What used to take three weeks started increasing it to about two months or so in terms of overall
05:38transit time.
05:39So that created some short term here and there supply-demand gap in the local market and
05:47leading to increase in prices.
05:50What goes up comes down, what comes down goes up.
05:52So ideally, logically, in the next four to six weeks, local prices should move towards
05:59international prices.
06:01That's our understanding of the market.
06:03That's good, sir.
06:05But how is the export market, because Europe is going to have new regulations by the end
06:10of this year, December, I believe, for rubber from deforestation land.
06:15So how do you think it is going to impact the supply, cost?
06:20It is a requirement from Europe whereby any rubber that goes into the manufacture of tyres
06:28is supplied to Europe from January next year.
06:32It's not about sale in Europe.
06:34If anything which reaches before 1st of January next year, there is no problem with respect
06:39to that.
06:41From 1st January onwards, anything that will reach Europe, there has to be some kind of
06:47a confirmation that the natural rubber that went into the manufacture of tyres was not
06:51sourced from deforestation land.
06:55And not only SEAT as a tyre company, but the tyre industry is also working towards meeting
07:02that additional requirements, which means that you have to work backwards to find out
07:07where the rubber is coming, not only Indian rubber, but also the international rubber.
07:11Our team is working on it.
07:13And I think we are preparing ourselves to meet the requirements with respect to EUDR.
07:19That's good, sir.
07:22Is that going to be a problem working backwards to go back to the sourcing of the rubber?
07:29It means additional effort.
07:31It is also possible those who are producing from non-deforestation land would expect higher
07:41demand from buyers in the shorter period of time.
07:45I don't think it's a big issue.
07:48But since that control over the entire supply chain with respect to sourcing is not something
07:56which we are currently reviewing, going forward we will work on it.
08:01So it requires some time for us to make sure that we confirm the requirements.
08:06Regarding your other question on exports, the demand from the international market for
08:10us has been robust.
08:12We grew strong double digits last year and even in the current year also we are growing.
08:18We are facing some short-term issues with respect to demand due to limited availability
08:28of vessels and containers.
08:29So therefore, we are losing out some amount of revenue on account of that.
08:36We hope with the improvement in availability of vessels and containers, we would be able
08:40to meet that demand which we are not able to fulfil completely.
08:44So we are very positive with respect to demand from exports.
08:49Will this be a year of consolidation compared to FY2025 on growth, margins and profitability?
09:01Last year's growth, we grew by little under 7% and all of it was a volume growth.
09:09We are experiencing an increase in raw material prices.
09:13This year the growth will have both price growth as well as volume growth.
09:19So we have started off well, in Q1 we grew by about 8.5-8.6%.
09:25We are working on double digit growth and therefore, if we achieve that, the growth
09:30will be higher than last year.
09:33Our downstream capacities are now available for us to utilise.
09:38We are likely to start our truck and bus radial plant in Chennai later this quarter
09:44or beginning of next quarter.
09:45That should help us in meeting both domestic demand as well as international demand.
09:51And we have also added capacities in passenger segments, which would hopefully help us as
09:57we are launching our truck and bus radial tyres and passenger car radial tyres in US
10:02market.
10:03And farm radial is another area where we have added capacities.
10:06We hope to utilise that better.
10:08So from growth standpoint, we expect current year's growth to be higher than last year.
10:12We are facing some headwinds with respect to raw material prices, which you also pointed
10:17out in the beginning.
10:18I hope we are able to mitigate the impact of raw material costs with appropriate pricing
10:25and normally it happens with a lag.
10:26So from profitability point of view, maybe later part of the year we would like to get
10:32back to normal levels of margins.
10:33In the interim period, there could be some impact on account of increase in raw material
10:37cost.
10:38That's the way we see.
10:39That's the management of SEAD.
10:40But with that, it's time for a quick break.
10:42And on the other side, we'll get into the management of GICRE to talk about their first
10:48quarter earnings and much more.
10:49Back in just a bit.