Dixon Technologies stock hits 52-week high even as Jefferies prefers Amber. Here’s why…

“The company with its diverse product portfolio ranging from LED TV to smartphones compared to that of air-conditioning focused Amber, seems to be a lucrative choice for the D-street,” an analyst on the condition of anonymity said.

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Shares of Dixon Technologies hit a fresh 52-week high of Rs 5,257.65 on September 27. The stock continues to trade in the green for three days in a row, having gained nearly 10 percent.

The consumer durable goods maker’s stock has witnessed high volume trade this week. Nearly 10 lakh shares of the company exchanged hands at the bourses on September 27 against a monthly average of 4 lakh shares.

At 2.30 pm on the NSE, Dixon Technologies stock was quoting at Rs 5,270.30 apiece, up Rs 172.15, or 3.38 percent.

Brokerage ratings

Positive brokerage ratings on the company, which is expected to gain from the union government’s production linked incentive scheme (PLI) 2.0, seems to have contributed to the stock’s upward move.

DAM Capital has a ‘buy’ call on the Dixon Technologies stock with a target price of Rs 6,000 per share. The brokerage is positive on the stock considering the company’s participation in the PLI scheme. It also sees strong growth prospects in the company’s mobile manufacturing segment.

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Jefferies on the other hand in its recent comparative report — Dixon vs Amber — has recommended ‘hold’ on the former with a target price of Rs 5,050.

“With 5 PLI approvals, Dixon enjoys the widest product slate among India’s electronic goods manufacturers. Mobiles and LED TVs comprise ~80 percent of the company’s sales mix. Xiaomi smartphone manufacturing could start from October, 2023. We estimate Dixon’s mobile sales to grow at +27 percent CAGR over FY 23-26, led by key customers like Samsung, Motorola, Nokia, ITEL and Jio,” the foreign brokerage said.

However, Jefferies is more upbeat on the other domestic consumer durables maker Amber, recommending a ‘buy’ and a target price set at Rs 3,740. It feels that Amber fares better than Dixon in terms of operating profit margins 7 percent versus 4 percent of the latter.

The brokerage also forecasts an increase in the Dixon’s price to earnings multiple at 50x by FY25 which might make it an expensive possession compared to the estimate for Amber which is at 28x.

Also read Tech goods import curbs, PLI can help Indian electronic manufacturers grow, says Goldman Sachs

Market reaction

While Amber stock with a ‘buy’ rating from Jefferies has gained 2.11 percent post the report dated September 26th, Dixon Technologies stock with a ‘hold’ rating has rallied 7 percent.

An analyst on condition of anonymity said, “Amber derives a major chunk of its revenue through manufacturing services for some of the major room air-conditioner (RAC) brands. The sales for RACs were muted across the segment in the last quarter due to erratic weather conditions. This might repeat in the ongoing quarter as well. On the other hand, Dixon with a diverse portfolio ranging from manufacturing mobiles to laptops seems to be a lucrative choice.”

This according to the analyst, who covers consumer durables sector, might have compelled the street to prefer Dixon more than Amber.

“In the near term, Dixon is also expected to tie-up with some of the major global laptop brands. As of now, it has a manufacturing deal with Acer. More importantly, since Dixon is also one of the largest domestic LED TV maker, it also stands to benefit from the oncoming T20 cricket world-cup,” the analyst added.

In the post market hours, Dixon Technologies announced that it had signed an agreement with the Chinese consumer electronic major Xiaomi for manufacturing smartphones in India.

“Our subsidiary Padget Electronics will carry out manufacturing of smart phones and other related products for Xiaomi in its Noida-based manufacturing facility,” the company said in a regulatory filing.

Financials

In its results for the April-June quarter, the company reported a 14.60 percent YoY (year-on-year) increase in revenue from operations at Rs 3,272 crore. Net profit for the quarter increased 48.88 percent YoY to Rs 67 crore. The operating profit margins for the quarter remained flat on a yearly basis to 4 percent.

Dixon Technologies is engaged in the business of electronic manufacturing services. The company specialises in manufacturing consumer electronics like LED televisions, washing machines, and mobile phones, as well as lighting products. It also offers solutions in the home appliances, security, and energy-efficient lighting segments.

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