Dixon Tech shares: Buy, hold, or sell after revision in smartphone volume guidance?

Dixon Technologies delivered a decent Q2 performance, with revenue rising 29 per cent YoY, 2 per cent above the consensus estimates. The growth was primarily driven by the Mobile and EMS segment, which expanded 42 per cent YoY, while the Home Appliances and Consumer Electronics segments saw declines of 3 per cent and 32 per cent, respectively. 

Following its results, Emkay Global retained its 'Buy' rating on Dixon Tech shares, with a DCF-based target price of Rs 19,000, citing its scale-led advantage, deepening customer relationships, and focus on margin expansion.

Emkay Global said despite 48 basis points (bps) contraction in gross margins, Ebitda margins inched up by 8 bps to 3.8 per cent, aided by a 1 per cent reduction in other expenses. After accounting for exceptional gains, including fair-value gains on Dixon’s stake in Aditya Infotech and proceeds from the transfer of its lighting business, adjusted profit declined 31 per cent YoY, Emkay Global noted.

Emkay Global highlights that the management has slightly revised its smartphone volume guidance, targeting 40–42 million units for FY26 and 55–65 million units for FY27, down from earlier estimates of 40–45 million and 60–65 million units, respectively. This includes volumes from the Vivo JV and a new ODM partner. Approvals for the Vivo and HKC JVs are expected soon, with another large ODM client likely to commence production by Q4FY26/Q1FY27.

Emkay Global said Dixon plans to drive its next phase of growth through Components, Telecom, and IT Hardware, aiming to replicate its mobile segment success. Key initiatives include scaling up HKC display production (Phase-1: 24 million smartphone displays; Phase-2: 60 million), consolidating Q Tech operations to boost capacity from 40 million to 200 million units, and expanding into lithium-ion batteries and camera modules with a Rs 30 billion investment over 3–4 years.

In appliances, Dixon is introducing a 16–18kg semi-automatic washing machine and advancing front-load models, with its Tirupati plant scheduled to start production in Q3FY26. In telecom, the company has secured a large US order for microwave radios, with pilot production expected by Dec-25 and commercial production by Q2/Q3 FY27, targeting a $1 billion medium-term opportunity.

The management has reaffirmed its medium-term targets of Rs 1 lakh crore in revenue and 4.5 per cent Ebitda margin, driven by new JVs, backward integration, and component localisation.