Hold Dixon technologies; target of Rs 4036: Emkay Global Financial

Emkay Global Financial's research report on Dixon technologies

Dixon reported an in-line quarter, with revenue missing our estimate and PAT at a marginal beat. While sales growth for 1QFY24 stood at 15% YoY, EBITDAM of 4.0% (vs 3.5% YoY) was the key positive, leading to EBITDA/PAT growth of 32%/48% YoY, respectively. Improvement in margin was supported by sales mix and operating leverage. While Management did not guide for any specific amount of sales for FY24, it gave assurance that the Group would be aggressive, along with its growth rates clocking much ahead of the industry’s. With the addition of a new client, growth concerns for FY24 seem to have abated.

Outlook

Given large part of the growth is expected to come from low margin Mobile segment, we factor in flattish margin for coming years. We roll forward our valuation to Jun-24E, with the revised TP at Rs4,036/share, based on 40x P/E; we retain HOLD.