The September quarter results of Dixon Technologies fetched mixed views from brokerage firms. The brokerage firms appear slightly cautious about the stock after the Q2FY23 numbers.
Dixon Technologies is among India’s leading electronic manufacturing providers and, as per brokerages, one of the largest beneficiaries of the government’s PLI scheme.
Shares of Dixon Technologies have been under strong pressure in the year 2022 so far. As of October 25 close, the stock is down nearly 22% this year against a 2% gain in the benchmark Sensex.
Brokerage firm Nirmal Bang Securities has an 'accumulate' call on the stock with a target price of ₹4,600.
"Dixon Technologies (Dixon) reported consolidated revenue of ₹38.7bn (up 37.9% YoY), 6.1%/11.3% above our and consensus estimates," said Nirmal Bang.
"Gross margin was down 30bps YoY at 8.6%. EBITDA came in at ₹1.45bn (up 32% YoY). EBITDA margin came in at 3.8% (down 10bps YoY/up 120bps QoQ) which was in line with our estimate and above the consensus estimate of 3.7%. Consequently, PAT at ₹777mn (up 24% YoY) was above our and consensus estimate by 4.3%/19.7% YoY," said the brokerage firm.
Nirmal Bang highlighted that while the management has maintained revenue guidance of ₹150bn for FY23, it has revised down its EBITDA margin guidance to 3.8-4% (versus 4-4.1% earlier) on account of current deprecation and lower unit realizations in LED TV business.
"The growth outlook for the next few years remains robust, led by: (1) ramping up of mobile phone PLI revenue booking, (2) value and volume growth in LED TV business, (3) international business opportunities in lighting, (4) foray into new verticals (fully automatic top-load washing machines, refrigerators, wearables etc.), and (5) further diversification prospects through PLI schemes (IT Products like laptops & tablets, telecom equipment etc.)," said Nirmal Bang.
Brokerage firm Elara Securities also has downgraded the stock to an 'accumulate' from a 'buy' with a target price of ₹4,750. The brokerage firm has raised FY23E and FY24E EPS by 1% and 4%, respectively, on a higher margin.
"We downgrade to an 'accumulate' from a 'buy' with a raised target price of ₹4,750 from ₹4,300 on September 2024E P/E of 40 times (unchanged). we expect FY22-25E earnings CAGR at 60% and FY23E-25E ROCE of 39%, propped by PLI schemes in electronic products and rising outsourcing model demand, especially by large MNCs, in the durables industry, export opportunities (low-cost producer) and operating leverage, which may boost margin," said Elara.
Brokerage firm ICICIdirect has revised its rating on Dixon Technologies from a 'buy' to a 'hold' with a target price of ₹4,730, valuing the stock at 55 times P/E (price-to-earning ratio) on FY24E EPS (earnings per share).
"Dixon’s share price has given a return of nearly 61% in the past five years (from nearly ₹2,656 in October 2017 to nearly ₹4,275 levels in October 2022)," said ICICIdirect.
According to a MintGenie poll, an average of 22 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.
