The shares of this largecap company surged around 6 percent in Monday’s trading session after its wholly-owned subsidiary signed an MoU with ASUS India Private Ltd for the manufacturing of notebooks. In one year, the stock has delivered more than 180 percent return to its shareholders.
Price Movement:
With a market capitalization of Rs. 80,650 crores, the shares of Dixon Technologies (India) Ltd started on a higher note at Rs. 13,259.95 compared to its previous close of Rs. 13,021.40.
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During the trading session, the shares hit a high of Rs. 13,848.15, gaining around 6 percent, also recorded as the company’s fresh 52-week high, and are currently trading at Rs. 13,804 apiece.
What Happened:
Such a positive movement in the share price was observed after the company in an exchange filing announced that through its wholly owned subsidiary, Padget Electronics Private Limited entered into an MOU with Asus India Private Limited for manufacturing of information technology products i.e. notebooks.
This partnership is expected to enhance Dixon’s position in the IT hardware sector, which the company views as a significant growth area, aiming to replicate its success in mobile manufacturing in the IT domain.
Financials:
Looking at the company’s financial statements, the revenue zoomed by around 41 percent from Rs. 4,658 crores during the March quarter to Rs. 6,580 crores in the June quarter. In addition, the net profits surged by 44 percent from Rs. 97 crores to Rs. 140 crores during the same period.
Brokerage View:
Dixon Technologies (India) Ltd. has recently received a significant price target upgrade from the Japanese brokerage firm Nomura, which initiated coverage with a ‘Buy’ rating and set a target price of Rs. 15,567, implying a potential upside of 13 percent compared to the current market price.
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Nomura projects that Dixon could capture over 30 percent of India’s mobile manufacturing market by FY27, driven by strong demand and strategic partnerships with global tech companies.
The firm anticipates that Dixon’s revenue could reach USD 13 billion by FY30, representing less than 10 percent of India’s entire electronics manufacturing services (EMS) industry, with the potential to grow to USD 52 billion by FY40.
As per Nomura, the increase in domestic value addition in mobile manufacturing, which has risen to 15-20 percent due to initiatives like the Production Linked Incentive (PLI) scheme, has bolstered Dixon’s operational capabilities. This trend is expected to continue, enhancing Dixon’s competitive edge in the market.
Additionally, the brokerage emphasized Dixon’s strong return on capital employed (ROCE) and its capacity to sustain a premium valuation.
Management Guidance:
The company expects slow growth for FY25 due to its ongoing ramp-up phase. The anticipated deceleration is attributed to the necessary adjustments and expansions currently underway.
Moreover, the company targets a revenue of Rs 3,500 crores for FY25 and plans to reach Rs 48,000 crore over the next six years in the IT hardware segment. It is currently in discussions with two major global original equipment manufacturers (OEMs) regarding server contracts.
Recent Development:
Recently, Padget Electronics Private Limited, a Wholly Owned Subsidiary of Dixon Technologies entered into an MoU with HP India Sales Private Limited for the manufacturing of notebooks, desktops and All-in-one PCs, under PLI 2.0 subject to signing of definitive agreements in due course.
Important Financial Ratios:
In terms of key financial metrics, the company reported a Return on Equity (RoE) of 21.69 percent and a return on capital employed (RoCE) of 24.70 percent for the period spanning FY23-24. Further, the net profit margin during FY23-24 was 2.06 percent.
Company Profile:
Incorporated in 1993, Dixon Technologies specializes in manufacturing consumer durables, lighting products, and mobile phones. They offer a range of products such as LED TVs, washing machines, tube lights, smartphones, laptops, set-top boxes, medical electronics, lights, and security surveillance systems.
Written By Vaibhav Patil
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