Emkay Global Recommends Buy on Dixon Technologies with Target Price of ₹21,100

Emkay Global Financial is optimistic about Dixon Technologies and has issued a “Buy” recommendation with a target price of ₹21,100, according to its research report dated January 21, 2025. Here are the key highlights and analysis from the report:

Key Financial and Business Highlights

Revenue Growth:
- Q3 FY25 revenue rose 117% YoY to ₹104.5 billion, though it declined 9% QoQ due to seasonality.
- Margins were stable QoQ at 3.7%.
Growth Drivers:
- Mobile & EMS Segment: Contributed 84% of 9M sales, with a 20 bps QoQ margin improvement. Dixon aims to double smartphone volumes to ~60 million units by FY27.
- IT Hardware: Targeting ₹25-30 billion sales in FY26 despite a 1-year import extension.
- Telecom Products: Anticipates 4x growth to ₹30 billion in FY25, with further doubling by FY26.
New Ventures and Expansion:
- Foraying into display modules, precision parts, camera modules, and battery packs.
- Evaluating semiconductor display fabs with potential for strong double-digit margins post capital subsidies under the ISM 1.0 policy.
Margins Outlook:
- Dixon projects a 100-120 bps rise in mobile margins over the next 24-36 months, even without Production-Linked Incentive (PLI) benefits.

Outlook

The company’s growth story is robust, with faster growth expected in IT hardware and telecom products.
EPS estimates for FY26 and FY27 were revised upward by 4.5% and 6.5%, respectively, reflecting confidence in Dixon’s expansion and efficiency.

Current Price Movement

As of January 21, 2025, the stock is trading at ₹15,264.75, down 13.07% intraday. This presents a significant upside to the target price of ₹21,100, representing a potential gain of approximately 38%.

Risks and Considerations

Increased competition in the mobile and EMS sectors.
Dependence on subsidies and favorable policies for semiconductor ventures.
High capex requirements for new projects like display fabs.

Recommendation

Emkay Global’s Buy recommendation reflects its confidence in Dixon Technologies’ ability to capitalize on growing market opportunities across multiple segments, supported by a robust order book and ongoing diversification efforts. However, potential investors should consult certified advisors before making investment decisions.