Dixon Technologies gains 9% after strong Q4 performance

EBITDA jumped 32.3 percent to Rs 156.3 crore in the fourth quarter of this fiscal over Rs 118.2 crore last year.

Shares of Dixon Technologies India Ltd gained over 9 percent, its biggest gains in one year, on Wednesday after the company reported better than expected earnings for the March quarter.

The stock hit a high of Rs 3,580.50 on BSE, up 9.3%, its maximum gains since May 31, 2022 in intraday. At 12.34pm, the stock was trading at Rs 3,502 on BSE, up 7% from its previous close.

The company  reported a 27.7 percent year-on-year (YoY) jump in consolidated net profit at Rs 80.6 crore for the fourth quarter that ended March 31, 2023. Consolidated revenue stood at Rs 3,065.5 crore during the period, up 3.8 percent against Rs 2,953 crore a year ago.

EBITDA jumped 32.3 percent to Rs 156.3 crore in the fourth quarter of this fiscal over Rs 118.2 crore last year. EBITDA margin stood at 5.1 percent in the reporting quarter against 4 percent a year ago.

"While addition of new customers in the mobile segment is imminent, we believe slowdown in some key segments will hamper the overall growth of brands, which will see additional impact from Dixon being a B2B supplier. Robust margin performance in Q4 is likely to sustain, as Dixon’s share in ODM manufacturing continues to grow. Building on the slight cuts in revenue, and offset by the existing margin trajectory, FY24E-25E EPS is largely intact (+2.6% in FY24E, while staying flat in FY25E)", said Emakay in its recent note. The brokerage house maintained hold rating and kept a target price at Rs 3403 a share.

Mobile to drive recovery

Management anticipates a rebound in the fiscal year 2024, primarily driven by the mobile segment. The company is currently in the final stages of securing partnerships with two customers, which is expected to generate revenues surpassing Rs 6,000 crore in FY24. Additionally, there are projections for a 12% increase in volume growth for TVs and a 20% increase in washing machines. The company is actively seeking new customers apart from Bosch in order to achieve these growth targets.

Furthermore, there are plans to enhance revenue through the Production-Linked Incentive (PLI) scheme and a positive outlook for growth in new segments such as refrigerators, FATL (feature phones), wearables, IT hardware, and telecom. The company also anticipates recovery in the LED TV market through the addition of new customers and sub-licensing of Android TV.

" We expect sales/EPS CAGR of 31%/44% over FY23- 25E, as we build ramp up in new facilities in existing segments (WMs, mobile phones, lighting) and sharp increase in new segments (telecom hardware, laptops, refrigerators)", said JM Financials in a note to investors. The brokerage house has maintained a buy rating on the stock and the target price was kept at Rs 4,000 a share.