Dixon Technologies (India) Ltd. share price target

Q2 sales up 28% YoY led by a 77% upswing in mobiles & EMS business which offset slow lighting sales

Dixon’s Q1FY24 performance was largely driven by growth in mobile and EMS divisions. Other segments reported revenue decline / flat revenues in line with slowdown in the white goods and durable market in India. Company has added new clients in its mobile business (Itel and Xiaomi).

Q1 topline strong at Rs 32.7bn (+15% YoY) with improved margins; new customer additions provide healthy visibility

We change our stance to HOLD from BUY.

While the company has taken the right steps to improve share of ODM, initiated cost saving measures, we believe weaker demand for white goods and durables is likely to impact revenue growth in near term.

Q4 topline of Rs 30.7bn in line with our estimate while improved ODM contribution aided a margin beat

Dixon had earlier guided for FY23E revenues of Rs170bn and has now cut the guidance to ~Rs125bn. We note some of the issues such as reduction in prices of open cells for TV are likely to hurt in coming quarters too. Also slowdown in white goods and durables due to steep inflationary pressures is also likely to impact the production in near term.