Multibagger electronics stock in a downtrend this year, oversold on charts; buy, sell or hold?

Shares of Dixon Technologies are in a downtrend with losses of 20% this year. The multibagger stock has turned negative with losses of 7% in three years. However, Dixon Technologies shares rose 232% in three years and 536% in five years.  The multibagger stock of the electronics manufacturing services (EMS) firm was trading 1.19% higher at Rs 14,570 in the current session. Market cap of the firm rose to Rs 88,305 crore. 

Turnover stood at Rs 1.98 crore as 1366 shares of the firm changed hands. 

Shares of Dixon Technologies are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages, signalling the trend has been on a negative side for the market leader in its segment. 

The relative strength index (RSI) of Dixon Technologies stands at 28.2, signaling it's trading in the oversold territory.

Brokerage Nuvama has a price target of Rs 16,600 on the stock with a hold rating. 

The brokerage has trimmed its EPS estimates by 8%–13% and expects 33%/37%/30% CAGR in revenue/EBITDA/adjusted PAT in FY25–28E. 

It has reduced with December-26 estimated price target to Rs 16,600 (from Rs 16,800), basis 65x Dec-27 earnings per share (EPS).

Nuvama said medium to long-term growth plans of the firm stay intact and the firm has guided toward Rs 1 trillion revenue target in next 3–4 years with 4–4.5% EBITDA margin. 

Nuvama says Dixon’s business model is highly scalable yet profitable, thanks to its frugal cost structure, capital-light intensity and, above all, high manufacturing fungibility. Negative working capital and 10 times asset turns allow Dixon to make 30% plus Return on Capital. "However, we believe that these valuations of over 72 times, a lot of growth runway is captured in the current stock price," said the brokerage. 

On the other hand, cautioning the investors, the brokerage said Dixon has a major capex ramp-up plan, which requires significant production mandate from local/global markets and efficient execution. This is coupled with certain demand expectations, and if that demand does not pan out, then it can pose downside risks.

Meanwhile, global brokerage UBS has a 'buy' call with a target price of Rs 23,000 per share. 

According to the brokerage, the company is entering a new growth phase through backward integration into non-semiconductor smartphone components. This could push the EBITDA margin by 110 Bps by FY28 against consensus of 40 Bps. 

Dixon Technologies is expected to benefit from entry into key areas such as displays, camera modules, enclosures, and batteries, which should support both growth and margin expansion.

HDFC Securities has a price target of Rs 18,830 on the Dixon stock. 

"We have introduced FY28E financials and roll forward our valuation to Sep-27E from Mar-27E. We maintain ADD with a revised target price of Rs 18,830, by valuing the  company at 70x Sep-27E EPS," said the brokerage. 

Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal Financial Services has a buy call on the Dixon Technologies stock with a target price of Rs 22,500. 

Khemka believes Dixon Technologies is well-positioned for growth, led by strategic execution and strong demand momentum. The mobile & EMS segment have recorded a significant YoY gain of about 42 per cent in volumes, led by improved client engagement and integration benefits.

The company undertaking backward-integration efforts via component-PLI schemes and long-term joint-venture partnerships, reinforcing margin expansion potential. 

Khemka said the firm's telecom & networking division has seen sharp growth, signalling successful diversification into infrastructure hardware beyond traditional consumer electronics.

Dixon Technologies (India) is the largest home-grown design-focused and solutions company engaged in contract manufacturing products in the consumer durables, lighting and mobile phones markets in India.