Dixon Technologies - IT Hardware To Define The Next Leg Of Growth: Nirmal Bang

Nirmal Bang Report

We recently met Mr. Saurabh Gupta – Chief Financial Officer and he explained the laptop landscape in India along with the opportunity available for Dixon Technologies Ltd.

Dixon has been selected as the laptop and tablet manufacturing vendor for Lenovo under the IT Hardware production linked incentive 2.0.

The company is expected to put up capex of ~Rs 2.5 billion, with manufacturing expected to start by Q1 FY25.

They currently manufacture IT Hardware products for Acer. With production expected at ~1 million units in FY25 (for both Lenovo and Acer) and to double from thereon in the coming years, revenue from this segment is expected to scale up significantly from ~2% levels in FY23 to ~10% by FY26.

We upgrade to 'Buy' with a revised target price of Rs 7,320. We have increased our multiple from 41 times to 48 times and have valued Dixon on FY26E earnings per share.

While we were conservative earlier, new developments such as bagging manufacturing contracts for ~30% market size of IT hardware in India, along with consistently increasing wallet share with existing customers and on-boarding of new customers has given us comfort to increase multiples by ~17%.

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