The shares of one of the leading EMS companies in India specialized in the manufacturing of consumer durables, in focus after brokerage company Motilal Oswal initiated a Buy Target on it with a 33 percent Upside Potential.
Price action
With a market capitalization of Rs. 92,997 crores, the shares of Dixon Technologies (India) Limited are up by 1 percent making a high of Rs. 15,710 per share compared to its previous closing price of Rs. 15,463.60 per share.
What Happened
Dixon Technologies Limited specializing in the manufacturing of consumer durables is in focus after Motilal Oswal initiated a “Buy” target price of Rs. 20,500 with a 33 percent upside potential.
Here are the reasons for the potential “Target “
Strong 3QFY25 Results:
Dixon Technologies reported impressive revenue for 3QFY25, with a 117 percent YoY increase, surpassing analysts’ estimates by 2 percent EBITDA also grew by 112 percent YoY, which was 3 percent higher than expected.
Mobile & EMS Segment Driving Growth:
The Mobile and EMS (Electronics Manufacturing Services) segment continues to be Dixon’s core growth driver. The company is benefiting from increased volumes with major clients, such as Motorola, Xiaomi, and feature phones, along with a Joint Venture (JV) with Vivo.
Backward Integration Plans to Offset Margin Contraction:
Dixon’s strategy of increasing backward integration is expected to mitigate potential margin pressures from the ending of the PLI (Production Linked Incentive) scheme by FY26. The company plans to start manufacturing displays from 1Q/2Q FY26, which is expected to provide higher margins in the long term.
Exploring Display Fab Manufacturing Under the Component PLI Scheme:
Dixon has plans to set up a display fabrication facility in collaboration with a global partner. The government’s component PLI scheme could support up to 70 percent of the capital expenditure, with 50 percent from the government and the rest from the state. This would significantly reduce the investment burden on Dixon and provide a faster payback period.
Improved Financial Outlook:
The company’s financial outlook is strong, with revenue, EBITDA, and PAT expected to grow at a CAGR of 55-60 percent from FY24 to FY27. This growth is anticipated to come primarily from the mobile and EMS sectors.
Valuation and Recommendations
Despite the impressive growth, Dixon’s stock is currently trading at 70.1x P/E on FY27 earnings, which reflects its growth potential. The target price has been revised to Rs. 20,500, which represents a 33 percent upside from the current market price of Rs.15,500.
Written by Sridhar J
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