Dixon Tech stock a long-term compounder? What share market analysts say

Dixon Technologies' June quarter results came in 7-10 per cent above market estimates but analysts remained mixed over the company's valuations following a 92 per cent rally on the counter in 2024 so far. Nirmal Bang stayed structurally positive as it draws comfort from newer developments such as  consistently increasing wallet share with existing mobile customers and on-boarding of new customers.

The domestic brokerage likes expanding of Dixon's export footprint in the mobile category and its foraying into the component manufacturing ecosystem – specially for higher margin business like industrial & automotive electronics. "We remain positive on the long term outlook, and believe that such developments will help in Ebitda margin expansion over the medium-to-long term," it said.

Kotak Institutional Equities too believes that the outlook for mobiles in FY2025 remains strong, driven by ramp-up of volumes across existing customers and addition of Ismartu volumes. Next two years are expected to be strong for Dixon driven by ramp-up of mobile volumes, it said.

"However, growth beyond mobiles, either (1) IT hardware, (2) components or (3) exports, will be key monitorable for Dixon. We raise our estimates by 10-11 per cent on account of strong mobile segment revenue and revise our fair value to Rs 6,900, it said while suggesting a 'Sell' rating on the stock. 

Calling Dixon Tech a long-term compounder, Nirmal Bang advised investors to accumulate the stock on dips, following a 85 per cent rally in 2024 so far. On Wednesday, the stock was up 3.62 per cent at Rs 12,400.

Nirmal Bang suggested a target price of Rs 11,700 on the stock, implying a PE of 58 times on June 2026 estimated EPS. The stock is trading at 20 per cent discount to its 5-year historical average PE multiple on 1-year forward basis. 

"We believe that the multiple is fair and it adequately captures: (1) 80 per cent EPS CAGR over FY24-FY26E (albeit a low base; mobile assembly ramp-up began sharply from the past 12-18 months), and (2) post-tax RoCE of 35 per cent in FY26E," it said.

Nirmal Bang said a strong order book, commissioning of Itel smartphones, export orders from Nokia and commissioning of Compal and scale-up of Longcheer portfolio are expected to drive the mobiles segment. 

Dixon Tech expects on-board of another global mobile brand in the upcoming month. The commissioning & ramp of Laptop production for Lenovo & Acer are expected to aid the strong topline growth. 

"With two new IT brands expected to commission within a year, overall production is expected at 15 lakh units in FY25, and set to double from thereon in the next couple of years. Revenue from the IT Hardware division is expected to scale up significantly to 10 per cent by FY27," Dixon Tech said.