In Wednesday’s Early trade, the shares of India’s second-largest mobile phone manufacturer surged nearly 6% reaching an intraday high price of ₹12,699 per share after the company reported net profit growth of 108%.
Dixon Technologies Limited is the largest company engaged in manufacturing products in the consumer durables, lighting, and mobile phone markets in India.
Dixon Technologies has a diverse product portfolio including consumer electronics, home appliances such as washing machines, lighting products like tube lights and downlighters, mobile phones, and more.
The company shares have gained 104% in the last six months and gained 197% in the last 12 months.
About the company: Dixon Technologies Limited is the largest manufacturer in India of consumer durables, lighting, and mobile phone products. Their diversified product portfolio includes consumer electronics, home appliances like washing machines, lighting products such as tube lights and downlighters, and mobile phones, among others.
In the previous fiscal year, domestic revenue made up 91 percent of the company’s total revenue, with export sales contributing 9 percent. For the current fiscal year, the company has allocated Rs 450 million for capital expenditure.
The company commands significant market shares, including 35% in LED TVs, 30% in washing machines, 25% in security surveillance systems, and 50% in lighting solutions. Notably, Dixon Technologies Ltd. stands as the fourth-largest LED light manufacturer globally and holds the top position in India, specializing in LED lamp production.
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The company generates 46% of its revenue from the Mobile & EMS Division, 32% from Consumer Electronics & Appliances, 9% from Home Appliances, 9% from Lighting Products, and 4% from the Security Systems division.
Dixon Technologies currently operates 17 manufacturing facilities spanning a total of 2.5 million square feet, with plans to expand to 23 plants covering 4.8 million square feet by FY 2024.
The company holds a market share of 35% in LED televisions, 30% in washing machines, 25% in security surveillance systems, and 50% in lighting solutions.
Financials: In Q1FY25, Dixon Technology’s profit surged by 108% from ₹67.19 crores to ₹139.70 crores. Revenue also saw a remarkable increase of 101%, rising from ₹3,271.50 crores in Q1FY24 to ₹6,579.80 crores in Q1FY25.
The mobile and EMS division experienced a substantial revenue growth of 189% year-on-year, reaching ₹5,192 crores in Q1FY25. Operating profit for this division surged by 223% to ₹171 crores. Its revenue contribution also grew significantly, from 55% in Q1FY24 to 79% in Q1FY25.
In contrast, the lighting products division saw a modest revenue increase of 2%, totaling ₹227 crores. However, its operating profit margin decreased from 19% to 15%.
Despite reporting strong results, Goldman Sachs has issued a sell rating on Dixon Technologies, citing a potential downside of up to 45% with a price target of ₹6,740 per share.
The brokerage highlighted that while the company’s mobile phone business has shown strong performance, other segments have been underperforming. Although management’s outlook remains positive, focusing on higher value addition and increased capability in mobile phones, there are concerns about potential lower gross margins and operating cash flow.
As of Wednesday, Dixon Technology shares were trading at ₹12,230, reflecting a 2.11% increase from the previous close. The company has a market capitalization of ₹73,180 crores.
Dixon’s price-to-earnings (P/E) ratio is 169, significantly above the industry average of 47.5, suggesting that the shares are trading at a premium. The company’s earnings per share (EPS) stands at 72.4.
Written by Omkar Chitnis
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