Buy Dixon Technologies; target of Rs 4500: Sharekhan

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Sharekhan's research report on Dixon Technologies

Consolidated Q1FY23 sales were in-line with estimates, while the bottom-line missed our estimates. Sales were healthy led by strong growth in lighting products, home appliances and mobile segments. OPM was restricted to 3.5% due to inventory and forex loss. Management expects margin to rise and be in the range of 4-4.4% backed by price increases, operating leverage due to higher volumes and backward integration. Revenue growth would be aided by new verticals like washing machines (WMs), refrigerators, customer additions and increase in volumes in mobile and WMs.

Outlook

We retain a Buy on Dixon Technologies (Dixon) with a revised PT of Rs. 4,500 given promising growth outlook backed by robust demand in its key segments.

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Dixon Technologies - 280722 - khan