Shares of Dixon Technologies rose as much as 5% on Wednesday after the electronics manufacturer partnered with Xiaomi to make mobile phones in India.

Dixon proposes to partner with Xiaomi India to carry out the manufacturing and export of mobile phones of Xiaomi and to also explore enhancing the component ecosystem in India through its wholly-owned subsidiaries, the homegrown company says in a stock exchange filing.

Reacting to the development, shares of Dixon Technologies gained 5% in intraday trade to ₹3,868.70 apiece on the National Stock Exchange (NSE). The stock opened at ₹3,705.75 against its previous closing price of ₹3,682.30. The company's market capitalisation stood at ₹22,692 crore.

The proposed association will be formalised subject to the execution of the definitive agreements, the filing says.

Union Minister of State for Electronics & Information Technology, Skill Development & Entrepreneurship, Rajeev Chandrasekhar, congratulated both the business houses on the proposed association.

"Xiaomi, which has built a strong brand equity over the years in India is known for its high quality and efficiency is reckoned as a strong force in smart mobile phones market in India and people across the nations have strong faith in their products. We are ecstatic and encouraged by the trust they have reposed on Dixon for the proposed association. This partnership will leverage Dixon's manufacturing excellence, superior execution track record and Xiaomi's expertise & leadership in Indian business ecosystem and it represents a major milestone in Indian Governments 'Make in India' initiative," says Atul B. Lall, vice chairman and managing director, Dixon Technologies (India) Ltd.

The Indian Electronics Manufacturing Services (EMS) industry has embarked on an upward journey, Lall says. Now, with most of the global mobile phone manufacturers and their supply chain partners investing in manufacturing, the Indian EMS industry is well-positioned to unlock its true potential in the coming years, he adds.

Meanwhile, domestic brokerages have mixed ratings on the counter. ICICI Securities believes weaker demand for white goods and durables is likely to impact Dixon's revenue growth in the near term.

"While there is strong demand for hearables, wearables and mobiles, there is still muted demand in white goods. While the company is confident of adding new customers in Mobile and Home appliances segments, we believe the ramp up will be gradual in FY24-25," the brokerage said in a note. ICICI Securities maintains a 'REDUCE' rating on the stock with a target price of ₹3,000.

Dixon Technologies reported a 27.7% year-on-year jump in consolidated net profit at ₹80.6 crore for the quarter ended March 31, 2023. BOB Capital Markets has a 'BUY' rating on the counter with a target price of ₹4,100.

"Management remains optimistic on the opportunities in the electronics manufacturing space (EMS) and expects to deliver growth significantly ahead of the industry in FY24, backed by a strong order book, new client addition and resultant incremental capacity," the brokerage said in a note.

"Though delayed client addition clouded the outlook for the mobiles business in Q3 FY23, management has partly allayed concerns by announcing major orders from Jio and Nokia," the brokerage added.

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