Buy Dixon Technology; target of Rs 22500: Motilal Oswal

Motilal Oswal's research report on Dixon Technology

Dixon Technology (Dixon)’s 2QFY26 revenue/PAT came in line with our estimates, with the mobile segment registering a strong growth of 42% YoY. Due to the base effect of Ismartu integration and improved volumes from existing clients, mobile volumes jumped YoY during the quarter. This quarter's performance was hit to an extent by demand slowdown due to GST rate changes and the postponement of decision-making from customers. Demand has started recovering for the consumer durable segment post GST rate cut, and we believe this will further be reflected in 3QFY26 results. With continuous focus on backward integration through component PLI and plans for long-term JV agreements with clients, we believe DIXON will continue to benefit from volume and margin improvements even after the PLI period ends by Mar’26. We marginally revise our estimates to bake in improved margin performance in the home appliances segment. We reiterate our BUY rating with an unchanged TP of INR22,500, based on DCF for the core business and the addition of valuation from its stake in Aditya Infotech.

Outlook

The stock is currently trading at 60.3x/45.9x P/E on FY27/28E earnings. We reiterate our BUY rating on the stock with an unchanged DCF-based TP of INR22,500.