Dixon Technologies shares climb 3% as Q1 profit, sales jump over 100%

Shares of Dixon Technologies Ltd climbed 3 per cent in Tuesday's trade following the company's better than expected quarterly results. The company said its consolidated net profit for the June quarter climbed 109 per cent year-on-year (YoY) to Rs 140 crore while its consolidated net sales surged 101 per cent YoY to Rs 6,588 crore. The consolidated ebitda for the quarter at Rs 256 crore was up 90 per cent YoY. The consolidated profit before tax figure at Rs 180 crore was up 100 per cent, Dixon Technologies said in a BSE filing. 

Following the development, the stock rose 3.21 per cent to close at Rs 11,999 on BSE.

Equirus Securities while recently initiating coverage on the stock noted that Dixon's operations have recently skewed towards mobile phones, mainly for three major brands: Samsung, Motorola, and Xiaomi. The loss of any of these clients/their market share would severely hit revenues, as seen in the past when Dixon's clientele included Karbon, Gionee, and Micromax – brands that lost market share or set up their own assembly lines. 

"Also, rising wages, which have already driven OEMs to relocate operations from China to lower-cost countries, only add to the woes. On top of all these, a reverse DCF calculation implies that to justify current valuations, Dixon must attain a 23 per cent Ebitda CAGR over FY24-FY40E," the brokerage said in a July 20 note.   It suggested a target price of Rs 9,830 on Dixon Technologies.

Dixon Technologies saw a 40 per cent CAGR over FY21-FY24, with capacity expansion across segments (ex-lighting) and continuous customer additions. But Ebitda growth lagged at a 24 per cent CAGR due to price erosion in lighting and incremental revenues from the low-margin assembly business (mobile phones).