Earnings Call Transcript - XNSE:DIXON 2026-10-30

Operator

Good morning, everyone. Good day and welcome to the Dixon Technologies Q2FY27 Earnings Conference Call hosted by TAM Capital Advisors. 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 touchtone phone. Please note that this call is being recorded. I now hand the conference over to Mr. Tanesh Shah from Dan Capital Advisor. Thank you, and over to you.

Tanesh Shah, Head of Investor Relations

Thank you. Good evening, everyone, and welcome to Dixon's Q2FI27 earnings call. Today, we have with us the management being represented by Mr. Atul Lal, Vice Chairman and Managing Director, and Mr. Saurabh Gupta, Director and Group CFO. At this point, I will hand over the floor to Atul, sir, for his opening remarks, post which we will open up the floor for Q&A. Thank you, and over to you, sir.

Atul Lal, Chairman

Thanks, Tanay. Thank you so much. Good evening, everyone. This is Atul Lal, and joining me today is our Director and Group CFO, Saurabh Gupta.

Saurabh Gupta, CFO

Good evening, everybody.

Atul Lal, Chairman

I would like to warmly welcome all our stakeholders to discuss our Q2 performance for financial year 2627. Key highlights for the quarter are as below. Revenues for the quarter ended September 30, 2026, was INR 21,806 crores. EBITDA, excluding fair value gain on the stake held by Dixon and Aritha Inputic Limited for the quarter, was 609 crores. Pat, after minority interest and excluding fair value gain on the stake held by Dixon, and as the input take limited for the quarter was 293 crores. Margins during the quarter were impacted on expiration of mobile PLI-1 scheme, along with elevated global memory prices due to rapid expansion of AI infrastructure. The pass-through of higher input cost through corresponding increasing in selling prices resulted in a lower reported margin percentage, particularly in mobile and IT hardware business, despite the recovery of increased cost through pricing adjustments. A mobile business has remained resilient, sustaining volumes at broadly stable year-on-year levels, despite the challenging operating environment. Exports volumes for a ranker customer is expected to ramp up meaningfully from Q4, with further growth anticipated along with exports of feature phones and smartphones, exports of truncheon groups brand from the next fiscal year. Profitability in washing machine and refrigerator was temporarily affected by fluctuations in polymer prices, rising freight cost and transit time, unfavorable foreign exchange movement, and higher cost of other key inputs. These pressures are expected to ease as costs pass through initiatives, gain traction, and operational efficiencies progressively strengthen. During the quarter, we also undertook calibrated pricing actions in response to the sharp rise in input cost. However, with a continued increase in prices, there is always a lag in passing off the same. Near-term external advance do not alter our medium-to-long-term growth story, and we continue to see strong opportunities for increasing localization and deepening of manufacturing, new customer additions, and India's growing position in the global electronics manufacturing ecosystem. Our strategic foray into display modules, camera modules, mechanicals, and other critical components Thank you. of sustainable growth. Beyond our established business and competent integration initiatives, we are actively evaluating opportunities to build a high-end, specialized EMS business with focus on high-margin, low-volume product categories with strong economics and superior margins. One of the strategic areas which is being actively pursued is manufacturing of silicon, photonics, Thank you. The initiative would accelerate moving up the technology value chain, expand our presence in high manufacturing, and position us to capture emerging opportunities in next generation electronics, and this is also aligned with the government policy framework of IASEN too. Now I will share with you the business performance and insights in each of the segments, mobile While in other EMS businesses, revenue for the quarter was 20,093 crores with an operating profit of 509 crores. Our mobile manufacturing business continues to be a key pillar of Dixon's growth strategy and we remain focused on scaling volumes, strengthening operational efficiencies and deepening our relationship with leading global and Indian customers. Despite a challenging industry environment with India's smartphone market declining by 26% year-on-year in Q2-27. According to industry reports, Dixon has demonstrated resilience by sustaining its smartphone manufacturing volume at broadly stable year-on-year levels. This reflects the strength of our customer relationships, execution capabilities, and ability to navigate a volatile demand environment. Exports are poised to become an important incremental growth driver for our mobile business. Export volume for our anchor customer Thank you very much.

Operator

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take a first question from the line of Siddhartha Behrar from Nomura. Please go ahead.

Siddhartha Behra, Analyst — Nomura

Yeah. Hi, sir. Thanks for the opportunity and congrats on a good set of numbers. Sir, first question is on the mobile side. So, if you can share the volume for the current quarter and how to think about the outlook for the second half, Given the weakness in the consumer demand, would you still maintain or if you can give some color for the second half? And can you go on the export side? I mean, if you also can break it up into what is the export in quarter two and where do you see the outlook for maybe next year?

Atul Lal, Chairman

Yeah, so in Q2, we have done approximately 9.7 million. So, total in H1, that is Q1 and Q2 combine up to September, we have done approximately 17.2 million. And with the outlook for H2, we feel they should be somewhere around 33 to 34 million. And in this, I am not including the BBO quantities. And that's how it looks. So, our anchor customer, that is Motorola, through the MPM as a scheme, we are going to be expanding our export signal in the opening remarks. For transition, we will start exporting the feature coins from next fiscal. So, the market has shrunk, but our volumes are going to be in the range of around 34 million in the current fiscal. That's how it looks.

Siddhartha Behra, Analyst — Nomura

Got it. And I mean, on the Vivo side, I mean, with the plants starting now in quarter four, what do you think we should aspire for the next year and how should the volumes ramp up there?

Atul Lal, Chairman

So, the integration process is on. We target to start production from Q4 of the current fiscal. Bivo has almost 20-22% share. So, their total volume is around 3 million. We feel that in the JV, we should be doing around 20-21 million. That's what the number looks like.

Siddhartha Behra, Analyst — Nomura

That's good, sir. And lastly, sir, on the customers' addition side, do you see with this LPMS scheme now in place, will there be more potential to add more customers in the coming years? And where do you see the total exports for us sort of trending in the next few years?

Atul Lal, Chairman

So, one can see a traction from our anchor customer. The outlook given is that we should be doing approximately 3.5 million units per quarter. That's almost 14 million. And out of that, almost 6 to 7 million is going to be exports, if not more. We have also acquired one Indian brand as our customer, which is doing extremely well. We feel that from that customer, for that the production has already started. We feel that for that customer next year, we should be doing almost 8 to 10 million. So these are new customer acquisitions, which have already come on board. So, there is a pressure in the market, but I think because of acquisition of our new customers and exports coming into play, and our deep stickiness with our existing customers, we're going to grow significantly, and all the more with the integration of Vivo into the system, the numbers are going to be very good.

Siddhartha Behra, Analyst — Nomura

Great, sir. Thanks a lot. I'll come back in the chat.

Operator

Thank you. Next question is from the line of Santosh Shishadri from Avengers Park. Please go ahead.

Santosh Shishadri, Analyst — Avendus Capital

Hi, very good evening.

Operator

Sorry to interrupt. Can I use your handset more, please? The audio is not clear.

Santosh Shishadri, Analyst — Avendus Capital

Yeah.

Operator

Is it enough? Go ahead, please.

Santosh Shishadri, Analyst — Avendus Capital

Yeah. Good evening and congratulations for a good set of numbers. My first question is on some of the new projects, you know, that you mentioned that you are working on. In your opening remarks, you mentioned that, you know, there are some projects that you are working beyond mobile phones. And also, in the previous calls, you spoke about, you know, investments into precision manufacturing and entry into industrial manufacturing and server opportunities. Can you put in perspective, you know, which of these segments will see major capital allocation, and where do you see the management spending most of the bandwidth internally? And also on the revenue front, how should we think about the revenue contribution from these segments? I actually don't want a number here, but directionally, like five years down the line, do you think any of these opportunities are large enough to overshadow the mobile segment? And, yeah, what are the steps that we are taking?

Atul Lal, Chairman

So, certain sectors, certain domains that we are pursuing very actively. The first one is the IT products category. If you see the numbers from practically minuscule numbers, in the current quarter, we have grown to almost 2100 stores. We already have four out of top five global brands as our customers. We are migrating from the present hybrid category, wherein we have committed a CapEx of 250 crores under ITPLI2, to the global category, wherein we are upping our CapEx plans to 500 crores. This is because of the order book, and also what we are foreseeing. So we feel, and this year itself, we feel confident that we're going to be somewhere around 6,000 crores in this business. We feel that in the next couple of years, this is going to be almost 15 to 20,000 crores business for us. Further, as I mentioned in my opening remarks, that our joint venture with InVentech is going to get operationalized by Q3 end or Q4 of the current fiscal. And that is further going to add volumes. And we are attempting a foray both into general and AI servers. So, this is IT products, IT devices category. In IT devices itself, we have diversified and expanded our portfolio. We have got into tablets where the business is already happening. We are already doing AIOs, and the line for desktops has been established in the production. We are going to start from Q3. Further in this, we are deepening manufacturing. So, the lines for SSD has already been set up. The trials for the customers of our SSD solutions have been operationalized. Display line in our new factory is set up, and the trials are going to happen by Q3. And further, the team is evaluating, setting up a footprint for mechanical inclusions. And also, we are exploring power supply. So here we are, we feel that it is going to be a large growth opportunity for us. And the second large growth opportunity that we are pursuing is one in the precision engineering side. And second, in the deepened technology of optical solutions. Wherein, we are looking at trans receivers and we are looking at other optical resolutions with advanced packaging. So, in trans receivers, we have already got into a JV with GemTech of Taiwan. Initially, it is going to be lower gigahertz, but finally, that is going to be for telecom network. But finally, in this JV, we are going to be upping the game for higher gigahertz for data centers. So, optical trans receivers, transducers, is going to be another very high growth area in the company. So, the huge focus is going to be on optical side, advanced packaging side, silicon photonic side. This is the growth area we are actively pursuing. So, these two are very tangible things we are looking at. The team is working, and as I had mentioned in my opening remarks, also on high margin, low volume business. But that, to be very candid, is still at an early stage. But we are pursuing that. So these are the three areas. Otherwise, there are expansion plans across all the categories. I shared about mobile. I shared about expanding capacities and expanding product portfolio in our washing machine business. I shared about expanding our capacity from 1.4 million units to almost 3 million units in refrigerators, expanding the product portfolio from just direct tools. We have already launched many cars. We have started manufacturing side by side. The infrastructure is getting in place for busy coolers, deep freezers, and frost free. So this is all the growth path for Dixon. Please be rest assured the numbers will be good, will be very good.

Santosh Shishadri, Analyst — Avendus Capital

Thank you, sir. Just as a follow-up, can you elaborate on the precision manufacturing side? What is the capability that we are trying to build here? Is it something to drive a new vertical, or does it augment the existing capability that we have in the mobile space?

Atul Lal, Chairman

So, it's in two tangents. One, definitely we're going to be pursuing the acquisition of precision engineering capability in the existing vertical. Therein I am referring to the mechanical enclosures for laptops, and possibly we are also going to be looking at the business case for the mechanical, and it's a deep precision engineering for the smartphones. Further, we are looking at also some opportunities in the precision engineering space beyond the consumer space.

Santosh Shishadri, Analyst — Avendus Capital

Thank you very much, sir. Thank you.

Operator

Thank you. Okay. Next question is from the line of Samit Sinha from Macquarie. Please go ahead.

Samit Sinha, Analyst — Macquarie

Yes, thank you. A couple of questions from my side. So, Salah, you were talking about, you know, Motorola ramping up under the NPM screen, looking to do more exports, especially next year. Can you talk about some of your other smartphone partners, how the conversation is going with them now that this additional incentive is available, that the cost disability help promote the conversation of using India as an export base? And secondly, when you mentioned cost pass-through, you mentioned the word initiatives along with that. So that made it a little more formal, in my opinion. So, I would have assumed that cost pass-throughs are part of the business and probably part of the contract that you have with your customers. So, can you talk about what you meant by initiatives and how should we see the progression of this pass-through? Thank you.

Atul Lal, Chairman

So, responding to the second part of your question first, in an EMS business, when I'm talking about materials, when I'm talking about laptops, IT products, When I'm talking about hairable wearables, when I'm talking about telecom equipment, it's an automatic pass-through. There is no time lag, nothing of that kind. It's an absolute EMS business. But when we are looking at our appliances business, when I'm looking at our refrigerator business, when I'm looking at our washing machine business, there, there is some kind of a time lag. That's the nature of the contract. So I hope I'm making it clear. So I retrace that in a complete EMS business, it's an automatic path. Whatever is the cost, whatever is the volatility in the prices, that's an automatic path. But in our ODM solutions, specifically when you are talking about lighting, refrigerators, and a bit of television business, in this, there is some lack. And so over a period of time, it takes some time for passing through that cost increase. That's the way it is. As far as the export volumes are concerned, the contracts with MOTOLA have been finalized and the ramp-up has started. And the ramp-up is significant. They are committed to meet the requirements. Please appreciate the incremental requirement of a baseline in NPMS is 5,000 crores every year. Second, business modalities and business model of starting the feature phone exports from Transition Group to start with will happen from next fiscal that has been finalized. And later, we're going to start doing the smart phones as well. So presently, these are the two customers for which, apart from that, in the new customer acquisition, we've acquired a large Indian brand which is doing really well. So that's where we are.

Samit Sinha, Analyst — Macquarie

One quick follow-up on the cost pass-through. I mean, these are smaller revenue contribution businesses. Can you help, can you tell us what the margin impact was because of cost pass-through not going through?

Atul Lal, Chairman

So, let's say in a washing machine business, which is traditionally 11% above the margin, between 10 and a half to 11, the margins compare to 8.6. 8.3. 8.3.

Saurabh Gupta, CFO

Yeah, so basically, Samit, if you look at the first six months numbers, probably 3% for washing machine business, and a similar number would be also there in a lighting business as well. So that is a kind of impact because of the increase in commodity prices, especially the volume of prices in washing machine, then also the fire freight cost and also the foreign exchange movement because it's an ODM business for us. So that is the kind of impact that we have seen. And so, yeah, but there are, we have been passing on that increase, but of course, the cost has also been increasing. So, there's always a lag in that sense.

Samit Sinha, Analyst — Macquarie

Thank you very much.

Operator

Thank you. Ladies and gentlemen, kindly restate yourself to two questions at a time. You may join back the queue for follow-up questions. Next question is from the line of Sonali from Jefferies. Please go ahead.

Sonali, Analyst — Jefferies

So, thank you for the opportunity and congratulations on a very strong sales number. Sir, my question is firstly on the sales number itself. As compared to the run rate of the last few quarters, there has been a significant year-on-year growth. Sir, could you articulate exactly from which segment, whether it's in mobile, which customer, or any other segment that this growth is coming on?

Saurabh Gupta, CFO

Yeah, so Sunari, basically, if you look at the volume growth, so year on year, the volume has been slightly marginally lower. The reason the growth in mobile revenues are there or IT hardware revenues is there is basically because the selling prices have gone up. Selling prices also largely has gone up because of the component prices and especially the memory prices. Memory prices have gone up significantly and memory, which used to be like a 12-13% bill of material of any smartphone is now significantly increased because the prices of memory are significantly increased. So, our year-on-year increase in selling prices is almost closer to 35-40%.

Sonali, Analyst — Jefferies

Got it. Very clear, Sarabh. The second question is with respect to the balance sheet. If I look at the September balance sheet numbers, the receivables and payables have surged as compared to March 26th. Any particular reason for the same?

Saurabh Gupta, CFO

Yeah, so we are basically beneficially of two PLIs now. One is the IT hardware, which has also shown good numbers in this quarter. So that number is also the PLI receivable for this particular year, for the first six months, and also the PLI is pending for last year. Last year, that is on the receivable side for IT hardware, and then also the telecom side. And then we have some bit of PLI left for the mobile side as well. So, yeah, there is a receivable number, and there is a correspondingly payable number also.

Sonali, Analyst — Jefferies

Got it. My third question is, again, is on the memory situation. Probably this is more of a strategic or a global question. Now, I understand that the key customers or the OEMs will help you source the memory chips in most of the situations, but how are you looking at the supply chain? I mean, are there any constraints in terms of procuring, or are they being able to comfortably procure the memory chips and also some other components like PCB, et cetera?

Atul Lal, Chairman

So, Sunari, on the supply chain side, I think we are in a good position. I am not seeing any impact on the production as such. So, cost undoubtedly has significantly increased, and we feel that they are going to be on a higher plane for time to come. But as far as the production and supply is concerned, we are fine.

Saurabh Gupta, CFO

Yes, Sunari, there is absolutely no problem on the supply chain side. We are getting the memories. There is absolutely no issue in that. The question is about the pricing of the memories. And yes, if you look at the latest results of SK Ionix and their commentary and all, what they have mentioned, Samsung and all, they have mentioned that this might continue for some more time.

Sonali, Analyst — Jefferies

I understand. Very clear. And just the last question. Sonali, I request you to join back the queue, please, as we are participants waiting for the turn.

Operator

Thank you. Next question is from the line of Reino from IIFL. Please go ahead. Yeah, hi.

Renu, Analyst — IIFL

Good evening, and congratulations, team, for strong results. So, my first question is, we did highlight IT hardware as the next growth pillar after mobile and targeting nearly 15,000, 20,000 crores of revenues in two years. So, if you can help us understand this 20,000 crores target when we look, does it include a revenue contribution from the data center or conventional servers? And what kind of investments are we targeting to do under the global category within the PLI scheme

Saurabh Gupta, CFO

So, Renu, one has mentioned in Sir's opening remarks. So, one, we are looking now, we are upping our game on IT hardware because the order book looks very good. So, we are upping, we are increasing the investment commitment from 250 crores, which was under the hybrid category, to now a global category, which is now 500 crores. So, we are seeing significant traction from all our customers. So, this 80 to 90,000 crore kind of a number that we feel confident about in the next couple of years would only come from the laptop and the tablet business and then something from the desktops and other kind of thing, where as of now, not incorporating or not including any business which can happen from the servers. So, once JV with Inventech gets operationalized by Q4, then we will set together on the server strategy. But yeah, as of now, this includes Will you see that this kind of potential can come only from our existing business of laptops and tablets?

Atul Lal, Chairman

So, we feel confident that we should be touching a number of almost 1.8 to 2 million units next year. The final plan is that we need to get a number of 4 million in this category. So, 4 million at today's run rate, K per unit, is almost 20-22,000 crores, plus tablets, plus AIOs, plus desktops. Server is separate.

Saurabh Gupta, CFO

So, basically, just to add, this year we are looking at a volume of closer to 1.3-1.4 million, which will translate into revenues of closer to 6-6,500 crores. So, assuming we are looking at a number of which is 3.5-4 million, you can just multiply, and that is a kind Sure, which is pretty interesting.

Renu, Analyst — IIFL

And the second part of the portfolio is, while similar, the telecom export, Sivar, we have been, have strong ambitions from Semtech. So, in your view, when do we, by when should we start to commence the export part of the business under Semtech JV? And as an update, if you can share what has been up for the HKC JV, should it be commercialized by fourth quarter or there could be further delays? And any change in the numbers of growth expectations in fiscal 28 from the mobile components, JV, both Qtech and HKC, if you can share. Thank you.

Atul Lal, Chairman

So, as far as the exports is concerned, that's from our telecom venture. And to start with, already the autobook is there for the microwave radios, focusing on the markets of the US. Also, as I had mentioned in my opening remarks, we are upping again on the optical network side, on the optical trans-receiver side. A lot of work is happening there. To start with the Gemtech JV, which we are trying to start the trials by Q4 of the current fiscal and commercial production next year, initially it's going to be focused on the mobile telecom networks, and then we're going to be getting into the higher year category for the data centers. But to start with, it's going to be focused on domestic market. So that's the bidders.

Renu, Analyst — IIFL

I've got an export that will still take about a couple of years.

Atul Lal, Chairman

Take some time. But from the telecom venture, the export is going to start. As far as the HKCJV is concerned, the installation of the line for notebook and auto model is in process. And it's going to get over by November. And the trial is going to happen by December. And the commercial production will start by Q4. As far as the mobile is concerned, there was some delay. But now the equipment has been shipped out. And we feel that the line installation will happen, and initially it's going to be for 20-25 million capacity, it's going to happen by February of 27, and the trial should happen by March, and the commercial production should start early next year. That's the way it looks. What else was your question? On Q-Tech, we have already expanded our capacity from 80 million to 120 million. Also, the capital investment has happened in deepening the manufacturing, which is known to be margin-accretive. And now, we have to ramp up the sales volume. That's the way we are. Finally, the ramp up of capacity over two years has to be taken up to 180 to 190 million, which is as per the original plan.

Renu, Analyst — IIFL

Thank you. Thanks, and best wishes to you.

Operator

Next question is from the line of Vipra Srivastava from Philip Capital. Please go ahead.

Vipra Srivastava, Analyst — Phillip Capital

Hi, sir. Good evening, sir. So, quickly, firstly, on the two-tech side, so, you know, on the subsidiary financials, two-tech's margin was declined by almost 450 goods in F526 compared to F525. And secondly, if you look at H1 and F527 numbers for two-tech, revenue has been plagued by a while, mostly. So, what gives the management conviction first that margins will revert back to 7% in F528? And secondly, there will be a volume ramp-up in F528. Thank you.

Saurabh Gupta, CFO

Yeah, so, basically, I have a couple of things. One, on this current year numbers, we feel that we are now in a significant expansion mode, where we expanded the capacity from 80 million to 120 million. Of course, the overall smartphone market, as you know, it's kind of seeing a slowdown overall. So as a result, this is a component which goes into a smartphone, which automatically gets impacted. Last year, their margins got impacted mainly because of the foreign exchange, where as part of their negotiated contracts or understandings, they didn't have a forex pass-through, which we have now been able to get it done from the customers. So, one, we see that, one, the volumes will keep picking up for that. So, there's a lot of volumes we feel that will keep getting better. Secondly, we are expanding, we're putting up capabilities for deepening of manufacturing, which will help us capture more manufacturing process here, more deepening of manufacturing here, which will help us emerge in expansion. And on account of this capacity expansion also, we'll start having an operating leverage. So please be rest assured on that. It is only a temporary kind of a blip. Ultimately, this business will generate a 6, 6.5, 7% kind of margin. That's the operating leverage happens. And we're also an ECMS PLI beneficiary. We feel the margins will see an uptrend from there onwards.

Vipra Srivastava, Analyst — Phillip Capital

So, second question is on the working capital side. So, in H1, we have seen a cash flow of 280 flows. I think it's familiar because of memory, but what are we used on that? Is it because of memory? So, if the cycle extends beyond CY28, will this be a trend or do you expect some reversion coming up?

Saurabh Gupta, CFO

We expect a significant reversal. So, of course, you are absolutely right. We had kept certain strategic inventories of memory. This is also peak season for us. Working capital generally peaks up during before quarter two, because a lot of money gets blocked under debtors and inventory and on. So, one is strategic inventory. We had certain advances from our customers in March, which subsequently got paid. Also, the PLI money, which is there for our IT hardware and the telecom business, which is there, which ultimately will come in and get realized. So, we feel that out of this large part of money, which is brought as a money working capital, we feel that almost 80-85% of that will get released before March.

Operator

Thank you.

Saurabh Gupta, CFO

Thank you.

Operator

Next question is from the line of K. Yul Pandya from ICSA Prudential Life Insurance. Please go ahead.

Yash Pandya, Analyst — ICSA Prudential Life Insurance

Thank you and congratulations for good numbers. Sir, first question on the mobile side. So, in overall scheme of things, you mentioned some customers, one Indian customer, some addition from Motola. Is there any ramped down from any customers on net net? If you look at overall numbers, what should be pencil in for FI28 organically and plus Vivo? So that is the first question. And second, with the change in dynamics in Q-Tech and HKC, as you highlighted just some time back, how should we think of revenue as well as profitability in the first year of those two businesses? Thank you.

Atul Lal, Chairman

So, volumes are concerned. As we mentioned that in this year, we should close somewhere between 33 and 34 million without Vivo. We feel that although the market is going to be under pressure, but there's going to be a decent growth in these numbers itself because of acquisition of new customer that is an Indian brand and also the export ramping up for a ranker customer. So, that's the way it looks. With Devo, I think it should be a decent number or somewhere between total number of 55 or 60 odd million. That's the way the numbers look. On the display and the camera module side, sort of, can you just...

Saurabh Gupta, CFO

As a display, as you mentioned, our automotive and our IT hardware lines have already been installed. Mobile lines will be installed by Q4. So, as guided earlier also, we feel that these are high double-digit team margin businesses for us, which, of course, we expect the same to start generating those kind of numbers in next financial year. Camera modules have already spoken on my previous question. So, clearly, both display and camera put together. We feel that over a period of next two years, we should be able to expand our margins by 80 to 100 WIBs. So, that is what we are targeting for.

Yash Pandya, Analyst — ICSA Prudential Life Insurance

Sir, just one follow-up. So, you highlighted F528 volume organically in 50s or so what total volume and X we were just, if you can just clarify that. And I was just checking for QTEC and SKC revenue next year or per unit economics or ESP volume, whatever you can share. So, that would be helpful.

Saurabh Gupta, CFO

Yeah, so on mobile volume, again, there are three levers. One is, of course, this year volumes here broadly saying 33-34 million, which we feel that the export ramp-up will happen for two of our anchor customers. Of course, one anchor customer, it will start happening from Q4, but again, there will be significant upside which will happen from next financial year. So we feel that the export numbers this year, we are targeting somewhere between 3 and a half to 4 million. We feel there will be significant growth in those export numbers for next year. So that gets added to the 34 million. Second is the Indian brand that we have just got added. So that can add another 6 to 8 million kind of numbers for us. And on top of it, Evo can add another 18 to 20 million. So that is the potential of the kind of organic growth that we're looking or the growth that we're looking in mobile phone business. Now, as far as Qtech is concerned, so of course, you have to make budgets for next year. But broadly, we should be in a kind of a number of almost somewhere between two and a half to three thousand odd crores. That is what we should be targeting for. And as far as display is concerned, we'll be putting up a capex of almost closer to 1,000-odd crores. So the real potential for display business, once it's completely wrapped up in the next couple of years, it can generate revenues of closer to 6,000 to 7,000 crores. A large part of it, of course, will be captive. So assuming that next financial year, we'll target to get at least 25-30% of that 7,000 crores.

Yash Pandya, Analyst — ICSA Prudential Life Insurance

Understood. Thanks a lot.

Saurabh Gupta, CFO

Thank you.

Operator

Thank you.

Rahul, Analyst — JPMorgan

You know, current year and next two years. If you just comment on that, please. Thank you.

Saurabh Gupta, CFO

So, so around the IT margins, of course, here also we have seen the increase in selling prices on account of memory. And we get a per piece conversion chart. So the margin may not reflect a, may not reflect a right picture right now, but I'll give you the margins. The margins would be closer to 2.2, 2.3% kind of numbers in IT hardware, which we feel that as we backward integrated more and more components. So, as we backward integrate display, we plan to do SSDs, we plan to do mechanicals there, and at some point of time, we will also look at power supplies. And if you look at the whole IT hardware PLI, the way it is structured is that the more you localize, the more incentive you get. So, there can be a very big margin expansion game, one, of course, on account of higher volumes every year, and second, on account of this backward integration. So, we feel that from here onwards, as you keep doing more backward integration on operating leverage on volumes, the margin expansion should keep happening. And on the, what was your second question, Rahul? Sorry.

Atul Lal, Chairman

Telecom. Telecom also, Rahul, the margins, in Telecom, the margins are going to be slightly higher. They're going to be in the range of around 3 to 3.2%. That's the way it looks.

Rahul, Analyst — JPMorgan

Just to clarify on this IT thing, so 2, 2.5 is the current situation because of per unit margin. But if you do more backward integration, you know, like a base case, assuming these components come through, What could be a peak margin here, you know, let's say 2-3 years out?

Saurabh Gupta, CFO

So, here also, Rahul, the idea is to backward integrate 25-30% of the bill of material. So, yeah, that can improve the margins by 8200 WIPs here.

Operator

Thank you. We'll take our next question from the line of Nehul Panjwani from 40 cents. Please go ahead.

Nikhil Panjwani, Analyst

Hello, sir. Thank you so much for the opportunity. I am new to this organization. So, my basic question is when I look at the expenses, they have shot up by 53% in this quarter. So, can you please show some light on what has led to this significant rise in the consumables cost of material?

Atul Lal, Chairman

Please appreciate the revenue that holds extended to almost 47%.

Nikhil Panjwani, Analyst

Right. But, you know, if you see the Q1 versus Q2, I would say, I mean, by the looks of it, So, due to the prices of cost of materials are shot up in a significant way compared to Q1.

Saurabh Gupta, CFO

So, no, for both mobile and IT hardware, the selling prices, because of the memory cost increase, those prices have also gone up. So, both, if you look at the expenses and income levels, it is actually broadly gone in the same way.

Atul Lal, Chairman

It is a linear kind of an equation. There is nothing untoward there.

Operator

Thank you. We'll take our next question from the line of Miraj Jain from BNP Paribas. Please go ahead.

Miraj Jain, Analyst — BNP Paribas

Hi, sir. Thank you for the opportunity and festive greetings. Sir, I just wanted to get your sense, firstly, on the NPMS incentives. So, given that the eligibility criteria that eventually came in was a little bit stricter than earlier expectation, and there is a baseline expectation of a 15% growth every year on the brand. So, how are we looking at the margin uptake from the MPMS or what kind of incentives that we believe we can incur over the years under this?

Atul Lal, Chairman

So, MPMS, we think that we are the frontrunner who are an eligible EMS player under that scheme. We appreciate that the MPMS is focused on the brand's performance. And our anchor relationships are confirming to us of their commitment to achieve the incremental sale to become eligible. This incremental sale is going to be generated from export largely. And also, the anchor customers are committed to localize more and more on the camera module display and mechanical side to leverage the benefits of the MPMS scheme. So, that's the way it looks.

Miraj Jain, Analyst — BNP Paribas

Sir, any quantifiable estimate of margin uptick we can expect from these NPMS incentives?

Atul Lal, Chairman

It is slightly difficult at this stage to, let's see how it pans out. It is the start.

Saurabh Gupta, CFO

Yeah, basically, the largest range of the tools, one is that your operating leverage will take in account of higher volumes and also the benefit of localization, whereby if you are able to localize 25% of your components, in our case, it's camera, modules, and display, then yeah, They can be upset. But yeah, so it will lead to more incremental volumes and operating leverage for us.

Miraj Jain, Analyst — BNP Paribas

Sure, sir.

Operator

And secondly, I request you to rejoin the queue, please, as we are participants waiting for their turn. Thank you. Next question is from the line of Akshay Gattani from UBS. Please go ahead.

Akshay Gattani, Analyst — UBS

Hi, sir. Congratulations on good result despite the headwind. My question is on VOJD. It can help us understand the potential cost loss of capital So,

Atul Lal, Chairman

the commercials for VivoJV are still being finalized, but we estimate the expected capex is going to be somewhere around 300 to 350 odd crores. That's the way it looks. As far as the commercials are concerned, please wait for some time.

Akshay Gattani, Analyst — UBS

Got it. This is helpful. And how would you expect quarter 3 volumes panning out while you maintain your full year guidance, quarter 3 F by 27 volume guidance, any color on that one?

Atul Lal, Chairman

So, quarter 3 being post-Diwali time, I think it's going to be somewhere in the range of around 7 to 7.5 million.

Saurabh Gupta, CFO

Yes, quarter 3 broadly will go back to the quarter 1 levels and quarter 4, quarter 2 levels. That's how you should look at it. So, we did 17 million and we are expecting broadly a similar number in the next 6 months. So, yeah, seven, seven and a half million in quarter three, and then it goes back to, say, nine and a half closer to similar volumes in what we did in quarter two. That's how we are looking at it. Got it. Thank you, sir.

Operator

Thank you. We'll take our next question from Tanisha from Dam Capital. Please go ahead.

Tanisha, Analyst — Dam Capital Advisors Limited

Yes, sir. Thank you so much for the opportunity, and most of my questions have been answered, but I just want to sort of understand a little better on what we spoke about earlier in terms of optical transceivers, in terms of advanced packaging and silicon photonics. So, sir, are we saying we're actually going to build the packaging piece of the optical transceiver along with the assembly of it? Or, you know, what are we thinking about in this area? And maybe if you can just, you know, spend a couple of minutes on what we're thinking about this segment.

Atul Lal, Chairman

So, please appreciate the biggest buoyancy today globally in electronics on the data centers, Shifting towards the optical domain. If you look at the performance of our various global peers, their margin profile, their growth is coming mainly from this domain. So what we are attempting to do is that bring this technology into India for servicing the global initiative of ours is already fructified into a joint venture by Gemtech of Taiwan. Second, more alternatives we have first made to bring it into India. So, this is going to be, of course, the optical trans receivers of higher frequency, you see, 800 dealers, 1.4, to get into that category, and further take it forward on to advanced packaging of ATMP. I have been deeper focused because into the data center today, into the network today, the technology on silicon photonics side, that is what we are pursuing. So, then I please appreciate, without being sound boastful, in Dixon, we have been nimble enough to identify the opportunities in which there is a deep buoyancy, there is an alignment with the policy framework, and this is an extension of the core that we are into. It's an extension of our electronics manufacturing capability, but much deeper technology. So, that's what we are pursuing.

Tanisha, Analyst — Dam Capital Advisors Limited

Absolutely. Thank you so much for answering that. I'll join back in a few minutes.

Operator

Thank you. Next question is from the line of Indrajit Agarwal from CLSA. Please go ahead.

Indrajit Agarwal, Analyst — CLSA

Hi. Thank you for the opportunity. I have a few questions. First, what would be the ASP of the Indian brand versus our current, let's say, 14,000, 15,000 currently? Second, what kind of CAPEX should we pencil in for FI27 and FI28? And thirdly, would the advanced packaging or the transferable business be as similar ROC as we have at the group level right now?

Atul Lal, Chairman

So, responding to the question on CAPEX, we have entered a CAPEX of 700 odd crores.

Saurabh Gupta, CFO

700 odd crores are what we have done in first six months, and we are likely to do closer to 500 crores. So, we should close the year with 1,200 crores. Of course, one has to do the numbers for next year, but probably that should be the run rate for next year financial year as well, somewhere between 1200-1300 odd crores.

Atul Lal, Chairman

So, responding to the first part of the question on difference in the ASP, the difference is between 25% to 30%. That's the difference in the USP, right? And the third is, yeah, we feel that the ROCs are going to be very high in what we are talking about in advanced packaging.

Saurabh Gupta, CFO

Inderjeet, some of the advanced packaging, Silicon, Potenex side, the margins are very high, and the investments are also in such a way that the ROC profile will be closer to what we do currently.

Operator

Thank you. Next question is from the line of Vayun Bhandi from Bajaj Alternates. Please go ahead.

Vayun Bhandi, Analyst — Bajaj Alternates

Hello, sorry, am I audible?

Operator

Yes, please go ahead.

Vayun Bhandi, Analyst — Bajaj Alternates

Yes, thank you so much for taking my questions and congratulations on my excellent comments. I think most of my questions will answer.

Operator

I am sorry, your volume is very low. Can you speak a bit louder, please? Can you repeat the question?

Vayun Bhandi, Analyst — Bajaj Alternates

Hello, am I audible now?

Operator

Yes, please go ahead.

Vayun Bhandi, Analyst — Bajaj Alternates

Yes. So, one question on the component strategy and capital allocation. So, you have widened a significant capix of 1,000 crores for the display segment next year and targeting a potential 7,000 crore revenue from that. So, my question is on the working capital, from the blocked working capital, which is expected to be released in March, as the PLI sees clear, will this internal cash generation be entirely sufficient to fund the display capix, or do we need to take a temporary debt? And secondly, what is the exact commercialization timeline for the display facility in express cost? Thank you.

Atul Lal, Chairman

So, we appreciate in the current fiscal, we'll be investing almost 300,000 crores is a total number.

Saurabh Gupta, CFO

I didn't say last, next year. So, basically, between this year, next year, and next to next year, that is the kind of investments we're looking at for displays. And this year, also, we are meeting our CAPEX requirements from our internal recruits, and we feel confident that as the earnings visibility improve, even next year, we should be completely meeting our CAPEX requirements from internal recruits and yet generating some free cash flow.

Operator

We'll take our next question from the line of Santosh Shishadri from Avengers Park. Please go ahead.

Santosh Shishadri, Analyst — Avendus Capital

Michael, thanks for the opportunity again. Just want to touch base on the bomb cost increases. So, given that the memory prices have increased, we are seeing, you know, price pass through and it is contributing to top-line growth. So, maybe down the line, when there is a reversal in the memory prices, do we see any headwinds in the top line? Or is there any other factor that can support a higher pricing?

Atul Lal, Chairman

So please appreciate, I mean, let's see how it pans out, because final revenue is going to be a mix of product portfolio. It's going to be what growth in volume you're getting. So that's the way it's going to be.

Saurabh Gupta, CFO

So revenue is a function of volume and revenue, pricing. So yes, if tomorrow the pricing gets corrected and becomes normalized, but your volume will continue to grow, which we have guided in our remarks some time back. What is the kind of growth we're looking at in mobile? What is the kind of growth within IT hardware, telecom? So all of that is, so I don't think so ever have a situation where it is a revenue degrowth.

Operator

Thank you. We'll take our last question from the line of Neeraj Jain from BNP Paripa. Please go ahead.

Neeraj Jain, Analyst — BNP Paribas

Hi, sir. Thanks for the follow-up. Just wanted a clarification on the GameTech JV. As you like, what kind of CAPEX and revenue we are looking at this? And also, will this be largely the business will be eligible for the ISM 2.0, that's also briefly mentioned, in which we are looking for advanced packaging for the silicon photonics. So, just want some clarification on what kind of revenue and CAPEX targets we are looking under this TV.

Atul Lal, Chairman

So, this is not a very CAPEX-intensive business. Initial investment is going to be somewhere between 50 to 60 crores. That's the first level of investment, and this is not a part of ISM, this is a part of ECMS, in which we are already in a beneficiary, our application has been approved. Yeah, as far as advanced packaging is concerned, it's eligible for ISM 2.

Neeraj Jain, Analyst — BNP Paribas

So, sir, this will be largely turned under Chemtech, or will it be a separate partnership? No, this is going to be separate.

Saurabh Gupta, CFO

Separate, separate. So, Chemtech is separate, and this will be, what we had just mentioned, will be separate.

Neeraj Jain, Analyst — BNP Paribas

Okay, perfect. Thank you so much, sir. Wonderful.

Operator

Thank you. Ladies and gentlemen, I now hand the call over to management for closing comments. Over to you.

Atul Lal, Chairman

So, thank you so much for being with us and for this interface, and thanks always for all your suggestions. Thank you so much.

Saurabh Gupta, CFO

Thank you so much, and happy to be with you, your family as well.

Operator

Thank you, members of the management. On behalf of Dan Capital Advisors, that concludes this conference. Thank you all for joining us today. You may now disconnect your line.