Buy Dixon Technologies; target of Rs 21,875: Anand Rathi

Anand Rathi's research report on Dixon Technologies

Dixon Technologies has signed a binding term sheet with vivo India to undertake OEM business of electronic devices, including smartphones. The company would hold 51% stake in the JV, while vivo India would hold 49%, with no cross-stakes between them. The tie-up will enable the company to manufacture non-Vivo phones too, thus increasing capacity from the current 50m phones pa (40-45% of outsourcing opportunity). Post onboarding vivo, the company now has tie-ups with all major Android brands.

Outlook

We expect it to benefit from ongoing mobile manufacturing localisation tailwinds regardless of market share movement among brands. The good growth outlook and margin expansion should drive RoCE to 46.4% by FY27, from 28.2% now. We, thus, retain our Buy rating, with a higher TP of Rs 21,875.