Shares of Dixon Technologies (India) Ltd took a beating on Tuesday morning, falling nearly 14 per cent as higher-than-estimated depreciation and finance cost led to a 5-7 per cent miss on Q3 profitability. Stock analysts tracking the stock though remained positive, but said Dixon Tech's ability to execute on display fabrication unit holds the key.
Dixon Tech shares plunged 13.81 per cent to hit a low of Rs 17,554.45 on BSE. The company has plans to set up its own display fabrication unit in a JV with HKC at a total cost of $3 billion. The ability to execute an asset-heavy venture with a long gestation period and different RoCE profile holds the key for Dixon Tech, Kotak Institutional Equities said.
JM Financial called Q3 a quarter of strong operating performance, with revenue growth 8 per cent and Ebitda 16 per cent higher than its estimates. Higher-than-estimated depreciation and finance cost led to a 7 per cent miss on PAT, it said.
"Dixon’s next leg of growth is expected to result from its strong focus on backward integration, which it initially expects to drive from its foray into display, camera and battery module assembly and, thereon, by setting up a display fab," it said.
Execution remains extremely crucial, it said while suggesting a target price of Rs 19,000 on the stock. InCred Equities said Dixon Tech has captured a large market share across categories in the consumer electronics outsourcing space, much above its peers.
The company, it said, is focused on leveraging its scale, operational efficiency, and strategic partnerships to capture a larger market share.
"For FY25F-27F, we have increased our revenue estimates by 9-11 per cent and PAT estimates by 1-4 per cent, factoring in higher revenue in mobile phone and IT hardware businesses. We maintain our ADD rating on the stock with a higher target price of Rs 20,200 (Rs 17,200 earlier), valuing it at 80 times," InCred Equities said.
Nuvama noted that Dixon tech announced a JV with VIVO in December 2024 and has expressed its intent to foray into Display Fab manufacturing, subject to announcement of government incentives.
"We are revising FY25E/26E/27E PAT by down 3 per cent/ up 5 per cent/10 per cent to reflect weaker performance in TV; Vivo JV; and full Ismartu consolidation. We roll forward valuation to Mar’26, yielding a target price of Rs 18,790 (earlier Rs 16,400), based on 65x FY27E EPS; maintain ‘HOLD’ on fair valuation," Nuvama said.