Dixon Technologies shares get two downgrades in a week, where's the multibagger headed?

Shares of Dixon Technologies have received two downgrades within a week. Global brokerage Morgan Stanley downgraded the EMS player amid concerns of rising competition and a slowdown in earnings. Subsequently, Dixon Technologies stock slipped 4% to Rs 14,378 on BSE today. Market cap of the firm slipped to Rs 87,904 crore. 

Turnover rose to Rs 51.68 crore as 0.36 lakh shares of the firm changed hands on BSE. 

The relative strength index (RSI) of Dixon Technologies stands at 55, signaling it's trading in the neither in the overbought nor in the oversold territory.

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.

Morgan Stanley downgraded the stock to 'underweight'. However, the brokerage raised its target price to Rs 11,563 per share. 

The downgrade stems from rising competition in Dixon’s core electronics manufacturing services (EMS) business, particularly after the expiry of the current incentive schemes.

Morgan Stanley expects a slowdown in earnings growth between FY27 and FY30. While Dixon’s move into component manufacturing is a positive move, Morgan Stanley warned that this zone could prove more difficult to scale than its traditional EMS operations.

On June 25, Philip Capital reduced the price target of the stock to Rs 9,085 from Rs 11,077 earlier.  It maintained a 'Sell' call on the stock. 

According to Phillip Capital, the firm's domestic business is facing a rise in competition. Motorola, Dixon’s largest client, has started outsourcing domestic volumes to Karbonn, said the brokerage. These moves could impact Dixon’s future growth.
 
Motorola, Dixon’s largest client, has started outsourcing domestic volumes to Karbonn; Longcheer may follow, said Phillip Capital. 

In Q4 of the last fiscal, Dixon Technologies clocked a 322% year-on-year rise in profit to Rs 401 crore led by an one-time exceptional gain of Rs 250.4 crore. Revenue climbed 121% year-on-year to Rs 10,292.5 crore against Rs 4,658 crore in the previous year.

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.