Bears pounded the shares of Dixon Technologies and the stock suffered deep cuts. The shares of the contract manufacturer tanked 20% on Friday’s trades to reach a 52-week low of ₹ 2642.50 apiece on the National Stock Exchange (NSE). This marked its steepest single-day fall since its listing in 2017.
The drop came after the company’s management cut its full-year revenue guidance for the current financial year to ₹ 12,700 crore from ₹ 15,000 crores earlier and posted a disappointing set of earnings, dampening investor sentiments.
Dixon Technologies reported a drop of 22.77% in its revenue to ₹ 2404.72 crores in the October to December quarter of 2022, against ₹ 3073.92 crores during the corresponding quarter of the previous fiscal. It posted a net profit of ₹ 51.89 crores in the latest quarter, up 11.88% against ₹ 46.38 crores in the corresponding quarter last year.
“We cut our earnings forecast by 12-16% to factor in demand weakness, resulting in 40% EPS CAGR over FY22-25E vs 43% CAGR in the last 3 years. We maintain BUY with revised target price of Rs 4,000, as we cut our target PE multiple to 45x Mar’25E (vs 50x earlier) as we are likely to witness near term weakness,” JM Financial said as it trimmed Dixon’s target price by 20% to ₹ 4,000 apiece, against its previous target of ₹ 5,000 apiece.
Emkay Global said that the company’s PAT (profit after tax) was 30% below consensus estimates. Moreover, consumer electronics and lighting sales declined by more than 35% YoY. These were the main segments that dragged down the sales.
” We maintain HOLD on the stock, with Dec-23 target price of Rs 3,165 per share based on 35x PE. Sales ramp-up remains the key monitorable going forward, in our view. Risks include slowdown leading to lower requirement by brands.” Emkay Global said.
Dixon Technologies is engaged in the manufacturing of products in the consumer durable lighting and mobile phones/smartphones markets in India. It operates under two models — Original Equipment Manufacturer (OEM) and Original Designing Manufacturer (ODM). It is a contract manufacturer for many well-known brands in India.
It is a midcap company with a market capitalization of ₹ 20,035 crores. The company has an ideal return on equity of 21.93% and an ideal debt-to-equity ratio of 0.55. Its shares were trading at a price-to-earnings ratio of 84.67 against the industry average of 18.12.
Written by Simran Bafna
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