Continuing their bullish trend for the seventh consecutive trading session, Dixon Technologies shares gained 4.66% to ₹4,577 apiece in intraday trade on Thursday. The stock has witnessed an impressive surge of 13.23% over the past six trading sessions and a significant advancement of 59.64% in a month.
The stock began its upward journey after the company announced that it 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 the wholly owned subsidiaries of Dixon.
The proposed association will be formalized subject to the execution of the definitive agreements, the company added. In addition, the company's robust Q4 performance also contributed to the stock's upward momentum.
It is worth noting that Dixon Technologie's stock lost nearly 29% of its value in CY22, following three consecutive years of significant gains. In CY19, the stock rallied by 84%, followed by a substantial gain of 254% in CY20 and a remarkable surge of 104.84% in CY21.
In the current year so far, it made a solid turnaround with a gain of 17.22% and it is up by 79.28% from its one-year low of ₹2,553.
For the March-ending quarter, the company's net profit surged by 28.6% year-on-year to ₹82 crore, while consolidated revenues for Q4FY23 increased by 4% to ₹3,065 crore compared to ₹2,953 crore in Q4FY22.
The operating profit also showed significant growth, reaching ₹156 crore, a 32% increase from Q4FY22. OPM came in at 5.1% as compared to 4% in Q4FY22.
Going forward, domestic brokerage Sharekhan believes the company will benefit in the long run from scaling up of its existing verticals, new customer additions, and expansion into other verticals such as refrigerators, LED monitors, AC components, and other hardware products.
The Indian electronics and consumer durable industry, valued at around Rs. 4,00,000 crore, presents significant growth prospects. Dixon, a key player in the electronic outsourcing business, benefits from its leadership position. The company's Tirupati facility expansion, along with partnerships with OEMs, will drive growth and market penetration.
Expanded capacity in consumer electronics and home appliances, coupled with a PLI scheme license for mobile phones, is likely to drive revenue growth momentum. In contrast, the margin may expand due to economies of scale and automation in the lighting business, the brokerage added.
The brokerage expects a sales/PAT CAGR of 27%/3% over FY23–FY25E and a margin expansion of 25–30 bps to 4.5% over the same period. However, the brokerage said it awaits a better entry point for investors given the expensive valuation.
Besides, Sharekhan also highlights potential downside risks for Dixon, including a slowdown in consumer discretionary spending and the possibility of business discontinuation or delays from key customers, which it said could impact revenue growth.
Additionally, adverse raw material prices, challenges in passing on price hikes adequately, and fluctuations in foreign exchange rates could affect margins, it noted.
Dixon is a leading manufacturer of products for key consumer durable brands in India. It has currently had ten state-of-the-art manufacturing units.
The company manufactures products with a capacity of 3.4 million LED TVs per year in the consumer durables segment, 20 million LED bulbs per month in the lighting segment, 1.2 million washing machines per year in home appliances, mobile phones, 7 lakh CCTVs, and 1.5 lakh DVDs per month in the security devices segment in India.
23 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
