Shares of electronics contract manufacturer Dixon Technologies are in focus on Wednesday morning amid a media report suggesting that the company is in initial talks to buy a majority stake in the domestic phone-making unit of China’s Transsion Holdings. As per a report by ET, Transsion’s India business is valued at about Rs 700 crore.
Dixon undertakes PCBA for its multiple existing businesses including LED TV, Lighting, Wearables and Hearables, Mobiles etc. In Q3 FY24 conference call, its management indicated that the company was seriously pursuing high-value add PCB assembly and box build in the industrial segment.
The talks with Chinese company, the report noted, came amid greater scrutiny of Chinese companies operating in the handset ecosystem. The government wants domestic companies and executives to have more sway over the country’s mobile phone industry, currently dominated by Chinese handset brands, as part of an informal mandate, people with knowledge of the matter told ET. Business Today could not independently verify the news.
Dixon share price target
Investec, which has revised its target on Dixon to Rs 7,700 from Rs 6,930, said the company has built a scalable business by focusing on high-volume consumer segments (with import substitution opportunities) and offering cost competitive solutions. Scale offers Dixon scope to backward integrate, further enhancing its cost advantage and thereby strengthening barriers to entry.
"Importantly, low capital intensity helps it deliver c.25% post-tax RoIC, generate healthy FCFF and maintain strong rev growth without raising capital. Its reputation of being a credible EMS vendor to the Electronics industry offers significant optionality (customer additions/ new product forays). On the other hand, we find PCBA cos’ business model less scalable (low volume segments) and more capital intensive, with threat to margins. It also offers limited optionality (fragmented industry, with no certainty that a particular company would succeed in a new emerging opportunity). Dixon is our preferred EMS pick," it said.
Dixon Technologies shares would also be in news today after Investec said . the company , with significantly lower capital intensity, higher optionality and scale benefits, is its top pick in the EMS sector.
Investec has raise our rev growth estimates post FY26E to bake-in benefit of recent client additions in the mobile phone segment.
“Based on reverse DCF, we find Dixon’s rev growth ask of 14 per cent CAGR over FY26-38E achievable vs 18 per cent/ 20 per cent for Syrma/ Kaynes. Dixon is our preferred pick in the EMS space,” it said.