After becoming strong in Indian contract manufacturing, Dixon Tech now has global aspirations. It is targeting the global LED-bulb market. The company’s new product categories like refrigerators and telecoms equipment are well placed to support growth in FY23/FY24, said Anand Rathi in a note.
The brokerage and research firm has upgraded the stock to a Buy with a target price of ₹5,936, based on FY24 earnings. After Q2FY22 earnings, it has revised its estimates and upgraded the multibagger stock that has surged over 124% in a year’s period. Though, Anand Rathi sees dull demand for consumer durables and delays in on-boarding customers as the key risks to its positive stance on the stock.
Dixon Tech’s Q2FY22 revenue shot up 71% on a yearly basis with growth supported by all major business categories. Profit after tax (PAT or net profit) increased only 20% year-on-year (YoY) during the second quarter of the current fiscal as interest cost rose 32% y/y and depreciation charges nearly doubled. “While the FY22 and FY23 operating performance are largely intact, we increase depreciation and finance cost since FY22 capex has increased to Rs4.5bn, funded via debt,” said Anand Rathi.
Dixon will set up a new plant with 0.6 m capacity per annum for direct cooling (DC) refrigerators, which would be ramped up to 1m by 2024. With that, it will have capacity to cater to 11-12% of India’s annual requirement.
“The JV with Bharti Enterprises has received approval under the PLI scheme (Dixon’s share: 51%). This JV can generate ₹14 bn-16 bn revenues next year. It can generate ₹80 bn-90 bn revenue in the next five years,” the brokerage’s note highlighted.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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