Dixon Technologies (India) Ltd. share price target

We retain our BUY rating with a revised PT of Rs. 18,800, factoring in a strong revenue/PAT CAGR of 53%/69% over FY2024-FY2027E. The stock currently trades at 82x/62x its FY2026E/FY2027E earnings, respectively.

We assess Dixon’s growth and margin profile beyond PLI in light of market concerns over its long-term growth and margins. In this note, we try to highlight that despite PLI ending in FY26, the mobile segment will continue to deliver healthy growth, driven by client additions, improved wallet share, and export opportunities.

The good growth momentum from Q1 continued for Dixon in Q2, largely from the cell-phone category. Backward integration in mobiles via screen manufacturing is underway while tie-ups for camera modules and mechanicals is being explored.

Overall revenue growth of 133% was led by strong performance in mobiles & EMS (235%), home appliances (22%) and Lightning products (29%) division. Operating profits were higher by 114% to Rs 426 crore, with OPM falling 33 bps.

Q2 revenue jumped 133% YoY, driven by Mobile and EMS growth; EBITDA margin slid 30bps on change in business mix

Dixon Technologies’ (DIXON) recent tie-ups and MoU with HP and Asus for the production of PCs, notebooks, and laptops under IT hardware PLI 2.0 augur well for scaling up its IT hardware revenues from current levels.

Q1 revenue jumped 101% YoY, driven by mobile and EMS growth; EBITDA margin slid 20bps on input cost hike

Q4 revenue jumped 52% YoY, driven by mobile and EMS growth; EBITDA margin down 120bps on input cost hike

The management is confident of healthy revenue growth, led by increasing mobile segment demand, new product launches, and new customer additions across segments. We maintain our HOLD rating on the stock.

Q3 revenue up 2x YoY led by robust growth in mobile & EMS segment; EBITDA margin dips 80bps on higher input costs

Takeaways from Q2FY24: (1) improved business visibility in core mobile division; its revenue contribution likely to improve from current ~50% to 60%+ by FY26, (2) aim on expanding margins by attaining operating leverage, better product mix and higher backward integration, (3) steady growth in exports with likely exports of INR 20-25bn in FY24 the as per company.

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

We change our stance to HOLD from BUY.

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

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