Electronics manufacturer Dixon Technologies delivered a robust set of numbers for the March quarter, marked by a fourfold surge in net profit. However, instead of lapping up the stock, the stellar earnings triggered a wave of profit booking in the counter as investors rushed to cash in gains due to Dixon tech’s rich valuations. As a result, the stock tanked as much as 8% in trade on May 21.
On the surface, Dixon Technologies reported a consolidated net profit of Rs 401 crore for the March quarter, marking a fourfold rise from Rs 95 crore in the same period last year. However, a closer examination reveals that a significant portion of this sharp increase was driven by a one-off gain of Rs 250 crore from the sale of shares in AIL Dixon Technologies.
That said, the company’s operational performance was robust. Revenue from operations in Q4 more than doubled to Rs 10,293 crore, up from Rs 4,658 crore in the corresponding quarter of the previous year. The mobile and other EMS (Electronic Manufacturing Services) segment was a key growth driver, with revenue soaring nearly 200% year-on-year to Rs 9,102 crore.
Looking ahead, the management also remains confident of margins improving in the mobile segment, led by backward integration, far offsetting the Production-Linked Incentive benefit (likely ending in Q4 FY26).
Brokerage firm Nuvama Institutional Equities, commended Dixon’s ability to post industry-leading RoCE (48.5% in FY25) on the back of execution, excellent balance sheet management and high asset turns. Despite liking Dixon’s unparalleled execution and balance sheet management, analysts at the firm believe the stock’s rich valuation constrains the scope of a sharp upside hereon.
To that effect, the firm retained its ‘hold’ call on the stock with a price target of Rs 15,470.
Adding to the cautious stance, another brokerage, JM Financial, downgraded Dixon Technologies from a 'buy' to a 'hold' rating and reduced its target price 5% lower to Rs 15,650.
The downgrade stems from three key concerns, including delays in ramping up production with Vivo and in display assembly operations with HKC, intensifying competition expected once the mobile PLI scheme concludes next year, and the company’s already high valuations, which are seen as limiting further upside potential.
