Dixon Tech shares decline 8% post Q4; here's what brokerages recommend

Shares of Dixon Technologies (India) plunged nearly 8% in early trade on Wednesday as investors resorted to profit-booking after the electronics manufacturer released its March quarter earnings report, which was largely in line with Street expectations. The market participants rushed to book profit amid rich valuations as analysts believe that “risk reward is not favorable”. On the other hand, some analysts see more momentum ahead, citing the ramp up in its existing customer base and investments in adding capacities across product verticals.

Extending its losing streak for the third straight session, Dixon shares declined as much as 7.8% to ₹15,272.75 on the BSE. Early today, the large-cap stock opened a tad higher at ₹16,570 against the previous closing price of ₹16,566.90, but soon slipped into negative terrain due to surge in selling activities.

At the time of reporting, Dixon shares were trading at ₹15,789.15, down 4.7%, with a market capitalisation of ₹95,109 crore. The counter saw a spurt in volume as 0.9 lakh shares changed hands compared to the two-week average of 0.25 lakh stocks.

At the current level, Dixon Technologies shares trade 81% higher than its 52-week low of ₹8,440.15 touched on June 4, 2024. The heavyweight hit its all-time high of ₹19,149.80 on December 17, 2024.

Dixon delivers strong performance in Q4

The Noida-based company reported a consolidated net profit of ₹401 crore for Q4 FY25, growing by four-fold from ₹95 crore in the same period last year. The significant portion of this profit was driven by a one-off gain of ₹250 crore from the sale of shares in AIL Dixon Technologies.

Revenue from operations more than doubled to ₹10,293 crore, from ₹4,658 crore in the same period of the previous fiscal. The strong growth in revenue was aided by mobile and other EMS (Electronic Manufacturing Services) segment, which generated a top line of ₹9,102 crore, up 200% year-on-year (YoY).

The management has sustained its FY26 and FY27 smartphone volume guidance of 40-45 million units and 60-65 million units, respectively, as the major exports opportunity from Motorola, IsmartU, and Compal would help offset the regulatory delay (to FY27) in commencement of a joint venture with Vivo. The management also plans to ramp up IT hardware production in FY26, while display module manufacturing is expected to start from FY27 (versus earlier guidance of H2 FY26).

Stock garners mixed reactions from analysts

Motilal Oswal has reiterated ‘BUY’ call on Dixon with a target price of ₹20,500, indicating a potential upside of 24% from yesterday’s closing level. The brokerage has marginally tweaked its estimates and expects a CAGR of 31%, 33%, and 44% in revenue, EBITDA, and PAT, respectively, over FY25-27. “We expect an EBITDA margin of 3.8% and 4.0% for FY26 and FY27, led by increased focus on backward integration post PLI. This will result in a PAT CAGR of 44% over FY25- FY27,” the report noted.

The contribution of PLI to Dixon’s mobile margins is 0.6-0.7%, and the company is confident of fully mitigating this through scale benefits, automation, and localised component manufacturing.

Emkay has also maintained ‘BUY’ rating on the stock, but reduced target price by 6% to ₹19,800, citing delay in backward integration. “Margin impact from mobile PLI (set to expire in FY26) remains limited to 0.6%, and the company targets offsetting this via its strategic backward integration into components and aided by strong scale and operating leverage; mobile PLI has been received till Dec-23, and Dixon has filed for PLI pertaining to Q4FY24 and FY25; remaining eligible PLIs have been received for the previous year,” the report noted.

On the other hand, YES Securities has assigned ‘Reduce’ rating with revised price target of ₹15,471, saying that all the positives are captured in the estimates, and risk reward is not favorable.

“Dixon is expected to deliver strong revenue performance given the ramp up in its existing customer base and company has on boarded new customers in FY25. We now build-in FY25-27E Revenue/EBITDA/PAT CAGR of 48%/46%/55%, we value the stock at 55x FY27 EPS. We assign REDUCE rating as CMP captures most of the positives and will wait for correction to enter the stock,” the brokerage house said in a report.

Another brokerage, Nuvama Institutional Equities has retained its ‘Hold’ call on the stock with a price target of ₹15,470, saying that the stock’s rich valuation limited the scope of a sharp upside hereon.

Meanwhile, JM Financial has downgraded Dixon Technologies from a 'Buy' to a 'Hold' rating and reduced its target price by 5% to ₹15,650.

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