This Indian supplier to Samsung, Motorola and Reliance Jio had a crazy run in 2020— this year might be a bit more testing

• Dixon Technologies’ stock has multiplied investors’ wealth nearly 5-fold since March 2020.
• However, analysts have downgraded their recommendation on the stock as they believe all the positives have been priced in.
• There’s still room for some surprise after the government announces details of the production-linked incentive scheme.
• Check out the latest news and updates on Business Insider.

The shares of Dixon Technologies have seen a fantabulous rally in the past one year. The stock has multiplied investors’ wealth nearly 5-fold since March 31, last year. However, analysts are now a bit nervous about the stock. They have downgraded their recommendations as they believe the stocks have priced in all the positives that could fuel the rally further.


According to analysts at ICICI Securities, the stock has already factored in rise in higher revenue from TVs, production-linked incentive-driven revenues in making smartphone parts, traction in 2G phones, set-top boxes, capacity-driven growth in LED lights, and washing machines. And thus, it may not see a huge rally in the near term.

High commodity prices and increased custom duty may contract its margins

As per the IIFL research report, the company, during its investor conference call, said they are witnessing pressure on the margin as commodity prices and freight cost have risen. The margin contracted 318 basis points (bps) in the third quarter, and the pressure is expected to continue in the fourth quarter as well. 100 basis points make up 1%.

Dixon gets nearly 70% of its revenue from mobile manufacturing, which it makes on behalf of brands like Samsung, Motorola and Reliance Jio.

Finance Minister, Nirmala Sitharaman raised customs duty on some mobile phone parts, from nil to 2.5% during the Budget 2021, may squeeze margin further.


The brokerage such as ICICI and AMSEC downgraded its rating from "BUY" to "HOLD" as it believes that there are still some surprise factors that may play out.

Can Mobile PLI surprise on the upside or downside?

The management retains its guidance of total ₹25,000-30,000 crore revenue under the mobile PLI scheme over the next five years with an EBITDA close to 3%. However, the government is yet to release the scheme's details. Analysts say the stock has already priced in the PLI benefits — it would be worth watching if the scheme matches the management's guidance.


Dixon added Motorola and Nokia as customers for smartphones and is in talks with other large brands as a third PLI customer. The commercial production for Nokia has started, while for Motorola it is expected to begin in March this year, post completion of all audits, the management revealed to analysts.

According to the IIFL report, Motorola will cover almost two-third of the PLI thresholds for Dixon and will represent 15-20% of its global volumes in the next four years, whereas manufacturing for Nokia is for the domestic market.

Lighting business continues to offer strong growth optionalities

The lighting sales grew 26% year-on-year to ₹350 crore— nearly 16% of total sales. This vertical may continue to grow as there is room for expanding both product lines and entering new markets.

"Dixon is already exporting to the USA and Indonesia for its anchor customer and is hopeful of large international orders from overseas retail chains," a Nirmal Bang report said.

Here’s what analysts expects from Dixon Tech stock:

The stock has already met the target price set by various brokerages in the past week.


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