Dixon Technologies stock crashes 20%; hits 52-week low

Shares of electronics manufacturing company Dixon Technologies crashed as much as 20% on Friday after the reported weak earnings for the third quarter.

The stock hit its 52-week low of ₹2,632 apiece on the National Stock Exchange (NSE) after the company slashed its revenue guidance to ₹12,200‐₹12,700 crore from ₹15,000 crore earlier.

Dixon Technologies' revenue from operations fell 22% year-on-year to ₹2,405 crore during the quarter ended December 31, 2022. Net profit of the TV maker grew 12% to ₹52 crore in Q3 FY23.

EBITDA margin in Q3 FY23 was 4.7% as against 3.4% in Q3 FY22. EBITDA improved by 10% to ₹114 crore in Q3 FY23 from ₹104 crore in Q3 FY22.

Expenses during the quarter declined by 23% year-on-year to ₹2,294 crore, due to a 2.6% fall in raw material costs.

Revenue from the Consumer Electronics segment declined by 39% year-on-year. Lighting Products' revenue contracted by 39% Y-o-Y and Mobile & EMS Division revenue contracted by 3% Y-o-Y. Home Appliances segment and Security Systems division, however, recorded revenue growth of 35% and 5%, respectively, on a yearly basis.

The homegrown company is engaged in contract manufacturing products in the consumer durables, lighting and mobile phones markets in India.

Domestic brokerage Yes Securities has a neutral recommendation on Dixon Technologies with a target price of ₹3,506. "Revenue growth has been below expectation as consumer electronics, lighting and mobile phones key verticals for the company has seen steep decline. We however upgrade the stock to Neutral as the stock has already corrected sharply and strong growth momentum is expected to resume. We roll forward our valuation multiple and now value the company at 40x vs 50x earlier as there could be downside risk if the demand environment remains sluggish for an extended period," it says.

JM Financial has cut its target price by 20% to ₹4000 against the previous target of ₹5,000. "We cut our earnings forecast by 12-16% to factor in demand weakness, resulting in 40% EPS CAGR over FY22-25E vs 43% CAGR in last 3 years. We maintain BUY with revised target price of Rs 4,000, as we cut our target PE multiple to 45x Mar’25E (vs 50x earlier) as we are likely to witness near term weakness," the brokerage says.

Emkay says the slowdown in some key segments has hit the overall growth of brands. "We have cut our FY23e-FY25e EPS by 16-20% largely on account of lower sales, while margin remains at 4%. We maintain HOLD on the stock, with Dec-23 target price of Rs 3,165 per share based on 35x PE. Sales ramp-up remains the key monitorable going forward, in our view. Risks include slowdown leading to lower requirement by brands," it says.

Foreign brokerage Credit Suisse has downgraded the stock to "neutral" with the target cut to ₹3,300 from ₹4,500 per share.