Dixon Technologies shares hit record high, then slip 18%; brokerages on Q2 earnings 

Shares of Dixon Technologies hit a record high on Friday post stellar Q2 earnings. The stock gained 6.21% to a high of Rs 15,999.95. However, it saw profit booking and slipped 13.33% to Rs 13,055.30 from the previous close of Rs 15,064.05 on BSE. From the record high, the stock slipped 18.40% on BSE. Turnover was the highest at Rs 176.33 crore as 1.26 lakh shares of the firm changed hands on BSE. Market cap of the firm stood at Rs 84,653 crore. 

Brokerage Nuvama sees limited upside potential in the stock post Q2 earnings. 

"Dixon delivered a strong Q2FY25 with revenue soaring 133% YoY to INR115.34bn (29% above estimate) led by a 235% YoY surge in the mobile segment. EBITDA rose 113% YoY to INR4.26bn (22% above estimates) with margins at 3.7%, impacted by higher mobile mix. PAT galloped 261% YoY to INR4.12bn boosted by investment gains while adjusted PAT jumped 123% YoY to INR2.55bn (20% above estimate). This showing underscores Dixon’s unparalleled operational execution," said Nuvama. 

"We are raising FY25–27E EPS by up to 23% to reflect the Q2 performance and growth outlook. We now value Dixon at 65x Dec-26E EPS, yielding a target price of Rs 16,100; retain ‘HOLD’ given limited upside potential," added the brokerage. 

Motilal Oswal has reiterated its buy call with a revised price target of Rs 17,500. The brokerage said Q2 earnings were above expectations.  

"Dixon Technology (Dixon) reported better-than-expected results driven by strong performance of the mobile and EMS segment, as well as Ismartu integration from mid-Aug’24. We raise our estimates to bake in improved performance for the mobile, telecom, and refrigeration segments and expect a CAGR of 48%/49%/56% in revenue/EBITDA /PAT over FY24-FY27. The revenue growth would be mainly driven by EMS (including mobile and IT hardware), consumer electronics, and new emerging segments such as refrigerators, wearables and hearables, and telecom networking products. We expect an EBITDA margin of 3.9%/4.0%/4.1% for FY25-FY27, led by an increased backward integration and the improving share of high-margin segments."

This will result in a PAT CAGR of 56% over FY24-FY27. The stock is currently trading at 85.0x/64.9x P/E on FY26E/27E earnings. It raised estimates by 13/5%/5% for FY25/FY26/FY27, the brokerage said adding that key risks to its estimates and recommendation would come from the lower than-expected growth in the market opportunity, loss of relationship with key clients, increased competition, and limited bargaining power with clients.

Another brokerage Investec has a Buy call with target price of Rs 15,900. Investec has maintained a buy rating and hiked the target price to Rs 15,900 from Rs 12,700.

"Strong Q2 was led by a sharp ramp-up in the mobile revenues and the global brokerage firm continues to believe IT Hardware can be an attractive growth opportunity for Dixon. The company's foray into components manufacturing can further improve the competitive strength/ profitability," said Investec. 

On Thursday, the electronic goods contract manufacturer reported a 265% on-year rise in net profit for the September 2024 quarter. Profit climbed to Rs 412 crore amid exceptional gain of Rs 209.6 crore and an increase in mobile phone production. Profit in Q2 of last fiscal stood at Rs 113.36 crore. Revenue climbed 133% to Rs 11,534 crore in the July-September period compared to Rs 4,944 crore a year ago. Earnings before interest, tax, depreciation and amortization (EBIDTA) stood at Rs 420 crore, up 110 percent year-on-year.

In terms of technicals, the relative strength index (RSI) of Dixon Technologies stands at 58.6, signaling it's trading neither in the overbought nor in the oversold territory. Shares of Dixon Technologies are trading higher than the 20 day, 30 day, 50 day, 100 day and 200 day moving averages.    

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.