Reduce Dixon Technologies India; target of Rs 4900: ICICI Securities

ICICI Securities research report on Dixon Technologies

Takeaways from Q2FY24: (1) improved business visibility in core mobile division; its revenue contribution likely to improve from current ~50% to 60%+ by FY26, (2) aim on expanding margins by attaining operating leverage, better product mix and higher backward integration, (3) steady growth in exports with likely exports of INR 20-25bn in FY24 the as per company. After a brief stint of uncertainty in Mobiles in FY23, the segment is witnessing strong demand momentum. With strong order pipeline and new client additions, Mobiles is likely to be the key growth driver for Dixon.

Outlook

We model earnings CAGR of 32.9% over FY23-25E. While the growth outlook looks strong, we require additional comfort on valuations. Thus, maintain REDUCE with revised DCF-based TP of INR4,900 (Implied FY25E P/E: 64x).