Shares of Dixon Technologies dropped 13% on Friday after the Noida-based homegrown contract manufacturer witnessed profit booking following a 256% rise in net profit at ₹412 crore for the second quarter.
The stock hit a low of ₹13,055 on the BSE.
The company's revenue rose 133% year-on-year to ₹11,528 crore for the quarter ended September. Revenue of the mobile division grew 235% year-on-year to ₹9,440 crore. The mobile division contributed 82% to Dixon's revenue during the quarter. Dixon manufactures mobile phones for several brands like Xiaomi, Oppo and Motorola among others.
EBITDA margin for the quarter stood at 3.6%. Operating profit or earnings before interest, taxes, depreciation, and amortisation rose 110% to ₹420 crore in Q2 FY25 from ₹200 crore in Q2 FY24.
“Through the strengthening of the overall demand environment and addition of more customers across businesses, our foremost objective continues to be a part of India’s long-term growth story and to ride the country’s robust consumption narrative and Make in India initiative to achieve industry leading growth,” says Atul Lall, vice chairman and managing director of Dixon Technologies.
"Production for a large global brand through Compal is expected to commence by end November 2024. We are in active discussions with another large global brand. We have finalised the location for manufacturing of displays. We expect to start manufacturing by Q1 or Q2 FY26. We are looking to get into precision components, mechanicals and camera modules," Lall says in the earnings call.
However, brokerage Nuvama forecasts limited upside potential for the stock after Q2 earnings. "We are raising FY25–27E EPS by up to 23% to reflect the Q2 performance and growth outlook. We now value Dixon at 65x Dec-26E EPS, yielding a target price of ₹16,100; retain ‘HOLD’ given limited upside potential," the brokerage notes.
Dixon, a key player in India’s electronics sector, started from a small rented factory in Noida in 1993. The company first secured an order from Lucky Goldstar, the former name of South Korean conglomerate LG.
Dixon Technologies' subsidiary, Padget Electronics, recently signed an agreement to manufacture HP laptops, desktops, and all-in-one PCs in Tamil Nadu. The first HP laptop manufactured at this facility is expected to be shipped by February 2025.
Padget Electronics is setting up a new 3,00,000-square-foot facility in Oragadam, Tamil Nadu. The facility will create approximately 1,500 jobs initially, playing a significant role in India's expanding electronics manufacturing sector. Once operating at peak capacity, the plant is expected to be capable of producing 2 million units annually.
The electronics industry in India has grown leaps and bounds and today it is more than 10 lakh crore industry. This industry employs over 10 lakh people in the country and has emerged as a major exporting industry out of India.
The Production-Linked Incentive (PLI) Scheme 2.0 for IT Hardware, introduced on May 29, 2023, offers a 5% incentive on net incremental sales over six years to eligible companies to boost domestic manufacturing of laptops, tablets, PCs, and servers.
